Japan’s largest steel maker, Nippon Steel, have announced that they will be merging with the rival Sumitomo Metal Industries in 2012. The move will create one of the largest steel companies in the entire world.

The deal was announced on Thursday and comes as little surprise to industry analysts considering the companies both hold small stakes in each other and have teamed up on numerous occasions to create steel products.

According to the Financial Times website: “Nippon Steel forecasts sales for the fiscal year ending in March of Y4,100 ($50.2bn). Sumitomo Metal Industries expects its sales for the same period to total Y1,500. Nippon Steel has a market capitalisation of Y1,954bn, while its smaller domestic rival has a market value of Y927.6bn.”

The companies claim that the merger will allow them both to be more competitive when it comes to developing new products and technologies, stating in a joint press release that “Confronted with the changes in the business environment surrounding the steel industry … the companies have come to share the understanding that it is crucial to further strengthen their mutual relationship.”