International Steel Mills
Thyssenkrupp, Tata Agree to Merge
Written by Sandy Williams
September 21, 2017
Thyssenkrupp and Tata Steel have signed a preliminary agreement to merge their European steel activities in a 50/50 joint venture. The new entity will be named Thyssenkrupp Tata Steel and will be based in the Netherlands.
The new company will have a workforce of about 48,000 at 34 locations. Major hubs of operations will be in Duisburg, Germany; IJMuiden, the Netherlands; and Port Talbot, Wales. Thyssenkrupp Tata Steel will come in at second place behind ArcelorMittal as the largest steel company in Europe. The partners hope to close the deal in late 2018.
The company anticipates annual sales of about 15 billion euros, or $18 billion per year, and shipments of 21 million tons annually. The merger will combine all of Tata’s flat steel operations in Europe with Thyssenkrupp’s Steel Europe business. Following the ramp-up phase, the partners expect synergies in the range of $480 million to $720 million per year.
“Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future,” said Dr. Heinrich Hiesinger, CEO of Thyssenkrupp AG. “We are tackling the structural challenges of the European steel industry and creating a strong No. 2.”
A reduction of 4,000 jobs is expected by the partners, with cuts of 2,000 in administration and 2,000 in production to be shared evenly between Thyssenkrupp and Tata.
“The steel industry has faced massive challenges in Europe for many years,” wrote Thyssenkrupp in its announcement of the agreement. “Steel demand is characterized by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure. This leads to the fact that various stages in the value chain are operating well below capacity. Consequently, all producers are under pressure to fill capacity and are forced to pass on restructuring gains to the market time and again. The result is a downward spiral and a need for restructuring about every three to four years, with major steel assets coming under threat of closure in the medium term.”
Natarajan Chandrasekaran, chairman of Tata Steel, said the company shares similar culture and values. “This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise,” he said. “The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals, and I am confident that Thyssenkrupp Tata Steel will have a great future.”
Sandy Williams
Read more from Sandy WilliamsLatest in International Steel Mills
BlueScope lowers profit predictions due to global steel slowdown
Australia’s BlueScope Steel has lowered its earnings guidance due to challenging conditions in the global steel industry.
Trump reiterates opposition to USS sale to foreign firm
Former President Donald Trump repeated his disapproval of U.S. Steel’s sale to a foreign owner in a campaign speech on Sunday.
Lindqvist gives up board position as he departs SSAB
After stepping down as president and CEO of SSAB, Martin Lindqvist announced he'll also be leaving his position on SSAB's board of directors.
Price on trade: Japan could help fund Nippon Steel’s acquisition of U.S. Steel
Earlier this month, Nippon Steel announced that it is applying for subsidies under the Japanese government’s Green Transformation Promotion Act to expand the company’s electric furnace steelmaking capabilities and to convert from blast furnace to electric furnace operations. As we have said before, transitioning from blast furnace- to electric furnace-based steelmaking is a good thing […]
Global steel production declines further in September
Global steel mill output totaled 143.6 million metric tons (mt) in September, the lowest monthly rate recorded this year.