Steel producers Thyssenkrupp and Tata Steel are to merge their European operations to create a joint venture with annual revenues of around €15bn.
The deal will create the second largest steel producer in Europe, with hopes of generating annual synergies of €600m.
With its headquarters in Amsterdam, the new entity known as Thyssenkrupp Tata Steel, will despatch in the region of 21 million tonnes of steel per year.
Second only to the European operations of ArcelorMittal, the 50:50 joint venture will employ 48,000 people with €15bn in sales.
It marks the culmination of a year of negotiations between the two steel producers, which have come under pressure from cheaper Chinese imports.
“This business combination creates a strong number two and is thus much better positioned to cope with the structural challenges in the European steel industry,” said Heinrich Hiesinger, chairman of Thyssenkrupp.
Some 4,000 jobs are expected to be cut in both administration and production functions, across the operations of both firms.
Thyssenkrupp´s production facilities are focused on its plant in Duisburg, Germany. Tata has operations in Port Talbot, Wales and IJmuiden in the Netherlands.
Tata claimed the deal could bring cost synergies of €400m to €600m per year through the integration of commercial functions, including research and development.
The companies also hope to reap further benefits over time by improving capacity utilisation across the combined entity´s three main hubs.
Over the first six months of the year, Chinese steel production accelerated at its fastest rate since 2013 as producers ramped up output to keep pace with orders.
However, data released last week indicating some slowdown in the Chinese economy has depressed iron ore and steel prices over recent trading sessions.
Minutes from the Reserve Bank of Australia´s August meeting revealed that the central bank believes Chinese steel production has already reached near-peak levels.