ThyssenKrupp, Tata to merge European steel operations

Berlin (AFP) – German heavy industry giant ThyssenKrupp and Indian group Tata agreed Wednesday to merge their steel operations in Europe, taking second place in the market behind ArcelorMittal.

The two groups, which will finalise the deal in 2018, expect annual synergies of between 400 and 600  million euros ($480-720 million) and are likely to shed 4,000 jobs in production and administration.

The job losses, which had been feared for several months by trade unions at ThyssenKrupp and German officials, would be divided roughly equally between the two groups.

The 50-50 joint venture, named “ThyssenKrupp Tata Steel”, will be a holding company in the Netherlands with joint management and will employ some 48,000 people across 34 sites.

“The steel industry has faced massive challenges in Europe for many years,” ThyssenKrupp explained.

“Steel demand is characterized by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure,” it continued.

This meant that various stages in the value chain were operating well below capacity.

“Consequently, all producers are under pressure to fill capacity and 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,” ThyssenKrupp said.

The combined European steelmaker was expected to achieve sales of 15 billion euros and produce around 21 million tonnes of steel per year.

But the “declaration of intent” signed between the two groups must still be be approved by the relevant regulatory authorities, ThyssenKrupp said.