ThyssenKrupp examining strategic options for Steel Americas plants in Brazil and the USA
The
Executive Board of ThyssenKrupp AG today informed the Supervisory Board of
ThyssenKrupp AG of its decision, in parallel with further technical and
commercial optimization, to examine strategic options in all directions for the
plants of Steel Americas in Brazil and the USA. The Supervisory Board noted this
with assent. The background to this decision is that the economic parameters
have changed significantly since the development of the strategy of an
integrated network with the slab plant in Rio de Janeiro and the processing
plant in Mobile, Alabama.
Dr. Heinrich Hiesinger, Executive Board
Chairman of ThyssenKrupp AG: "We have said that we want to sustainably improve
our performance and carry out regular strategic reviews of all our businesses.
This also applies to our biggest challenge Steel Americas. We continue to
believe that both plants will hold leading positions in their respective markets
in terms of technology and conversion costs. But since the plans for the project
were made the economic parameters both in Brazil and in the USA have changed
from our original assumptions. There are clear reasons that now call this
strategy into question. We therefore have to examine whether it still makes
sense strategically to operate the two plants in a common integrated
network."
The strategy for Steel Americas developed in 2007 was based on
two basic premises: Slabs were to be produced at low cost in Brazil and shipped
with cost advantages to the USA. After processing they would then be sold on the
NAFTA target market with a corresponding price premium reflecting their high
quality. In addition to the general business downturn due to the financial and
economic crisis, the different rates of growth in the two regions are calling
this strategy into question. Whereas the US economy is showing no major
momentum, Brazil is enjoying strong growth. This is having corresponding effects
on the cost and demand situation in the two countries.
Production costs
in Brazil are rising disproportionately due to increasing labor costs, inflation
effects and in particular the appreciation of the Brazilian currency. In
addition, ore prices have increased sharply and the new ore pricing model brings
disadvantages to Steel Americas compared with some backwards integrated
suppliers in the USA.
At the same time, due to slow demand, it will
probably only be possible to achieve the price premiums on the US market both
now and in the medium term with specific steel grades and in specific sectors.
ThyssenKrupp is very confident that it will be able to realize corresponding
price premiums with automotive customers due to the quality and grades of its
high-strength steels and previously largely unavailable characteristics such as
larger sizes. But for the products manufactured for other sectors and
distributed via service centers, intense competition leaves virtually no scope
for differentiation of this kind.
The viability of an integrated
strategy with slab production in Brazil and high-margin marketing in the USA is
therefore exposed to considerable risks. That is why the Executive Board has
decided to investigate strategic options in all directions for both plants. This
may involve a partnership or a sale to a best owner whose strategy can better
utilize the quality and the specific market capability and competitiveness of
the plants.
Irrespective of this strategic review, ThyssenKrupp will push
ahead with the ramp-up of the two plants. Clear progress has already been made
on this. The plant in Brazil produced around 1.7 million tons of high-quality
slabs in the first half of the current fiscal year. In the same period, the US
plant shipped around 1.4 million tons of steel to customers. The start-up of
coke oven battery C is proceeding to plan. As a result it will be possible to
complete the operational ramp-up by the end of the current fiscal year, after
which the optimization phase will begin.
At
ThyssenKrupp 170,000 employees in around 80 countries work with passion and
expertise to develop solutions for sustainable progress. Their skills and
commitment are the basis of our success. In fiscal year 2010/2011 ThyssenKrupp
generated sales of €49 billion.
For us, innovations and technical
progress are key factors in managing global growth and using finite resources in
a sustainable way. With our engineering expertise in the areas of "Material",
"Mechanical" and "Plant", we enable our customers to gain an edge in the global
market and manufacture innovative products in a cost- and resource-efficient
way.
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