Feb 2 2005
The strategic plan drawn up by ThyssenKrupp Acciai Speciali Terni for the Terni plant envisages the phased closure of electrical steel production at the Italian plant by the end of this year. At the same time the plan includes a €90 million investment package for the expansion of stainless steel production over the next two years. Dr. Michael Rademacher, Chairman of the Executive Committee, said: "The electrical steel employees will be given a job guarantee and most of them will be employed in the core stainless steel flat business of ThyssenKrupp Acciai Speciali Terni and its subsidiaries."
The background to the plan is as follows: The Steel segment of ThyssenKrupp AG produces 1.2 million metric tons of stainless steel a year at the Terni plant, employing around 3,000 people. In the middle of this plant is a niche production unit producing 70,000 tons of electrical steel and currently employing 350 people. In the past two fiscal years the electrical steel unit has run up losses of €75 million. There is no end to the losses in sight as the market for electrical steel is characterized by overcapacities. Imports from countries with cost and/or currency advantages are pushing into Europe, particularly from Russia, China and the USA. ThyssenKrupp Steel therefore has to adapt its capacity in Europe to the market conditions.
Of the Group`s three electrical steel plants in Gelsenkirchen, Isbergues and Terni, Terni is the least economic because it uses steel produced in the electric arc furnace, which requires large amounts of electricity - electricity prices in Italy are by far the highest in Europe - and scrap, which is currently extremely expensive. The competition, on the other hand, uses cheaper blast furnace starting material based on iron ore.
The European steel industry is for the most part no longer in state hands but privately owned. Subsidies, which led to major problems in the sector in the 80s and 90s, have ended. They resulted in overcapacities and the maintenance of uneconomic plants at public expense. What was good for the common good - and Italy was in step with other subsidizing countries - was a disadvantage for other economies, because in many cases their companies had to pay for competitive disadvantages with falling profits. Today the market demands rapid solutions to profitability problems and private owners have to pay for losses that occur.
In Europe, the market for carbon steel flat is showing only moderate growth rates. Growth in stainless steel is more dynamic. The current worldwide boom is being driven by Asia - mainly China - and the USA. Electrical steel is hardly growing at all in Europe.
ThyssenKrupp Steel is world market leader in stainless steel and intends to strengthen its position, focusing on the particularly profitable high-tech product cold-rolled strip. ThyssenKrupp Acciai Speciali Terni plays a significant role in this strategy. Italy is one of the Group`s most important markets. Dr. Rademacher: "The Terni plant in Europe`s second largest stainless steel market is one of ThyssenKrupp Steel`s key pillars, supplying starting material to cold rolling mills in China and Mexico. And that will remain so. That is why we plan to invest."
For a company that has an eye to all its stakeholders - shareholders, customers, employees, suppliers - and a listed company that is closely monitored by analysts, the profitability of all activities must be kept in focus. That also applies to non-core activities like electrical steel. The trade unions can and should be satisfied with this result. The region will also profit from the strengthening of stainless steel production. With its investment, ThyssenKrupp Acciai Speciali Terni is securing jobs in the company and its environment and will remain by far the biggest tax payer in the region.
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