TOKYO - In what is seen as a move leading eventually to a merger of their aluminum businesses, Furukawa Electric Co., whose aluminum division is Japan's third-largest fabricator, and Sky Aluminium Co., Japan's fifth-largest, will form a 50-50 joint venture company in October.

The new company is an outgrowth of the business cooperation agreement concluded by the two companies last January. It will study the possibility of pooling the resources of the two fabricators initially in areas of long-term capital investment planning, purchasing of raw materials and equipment, physical distribution and transportation to reduce operating costs, according to spokesmen.

The two companies have been promoting the exchange of technology and personnel through the cooperative agreement since last January. But the new joint venture, to be known as Alfus Ltd., will serve as a conduit between the two fabricators to further facilitate their collaboration.

The executives said that Furukawa Electric, which is involvedin both rolling and extrusions, has an annual production capacity of 250,000 to 260,000 tonnes, while Sky Aluminium has a rolling capacity of approximately 160,000 tonnes per year.

The executives declined to speculate if the joint venture would eventually develop into a merger combining Furukawa's aluminum division and Sky Aluminium. But the move is seen by many market observers as heralding a big shakeup of Japan's aluminum industry confronted with growing international competition.


"In North America, there are only two majors left--Alcan and Alcoa," one veteran aluminum executive noted. "There are several in Japan--which is too many."

If the Furukawa-Sky merger materializes, it would create Japan's largest aluminum company, surpassing current leader Kobe Steel Ltd. Other major producers are Sumitomo Light Metal Industries Ltd., Mitsubishi Aluminum Co., Nippon Light Metal Co. and Showa Denko KK.