Memorandum of understanding signed to combine European steel activities in 50/50 joint venture
Positioning as strong quality and technology leader
Annual synergies of €400 million to €600 million expected
Signing of agreement targeted for early 2018 and closing by 2018 year-end
thyssenkrupp and Tata Steel have today signed a memorandum of understanding to combine their European steel activities in a 50/50 joint venture. Their aim is to create a leading European flat steel player to be positioned as quality and technology leader. The new entity is set to have pro-forma sales of about €15 billion and a workforce of about 48,000, currently at 34 locations. Shipments are envisioned to be about 21 million tons a year.
Dr. Heinrich Hiesinger, CEO of thyssenkrupp AG: “Under the planned joint venture, we are giving the European steel activities of thyssenkrupp and Tata a lasting future. We are tackling the structural challenges of the European steel industry and creating a strong No. 2. In Tata, we have found a partner with a very good strategic and cultural fit. Not only do we share a clear performance orientation, but also the same understanding of entrepreneurial responsibility toward workforce and society.”
Natarajan Chandrasekaran, Chairman of Tata Steel: “The Tata Group and thyssenkrupp have a strong heritage in the global steel industry and share similar culture and values. This partnership is a momentous occasion for both partners, who will focus on building a strong European steel enterprise. 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.”
To be named thyssenkrupp Tata Steel, the planned joint venture will be managed through a lean holding company based in the Netherlands. It is to have a two-tier management structure comprising a management board and a supervisory board. Both boards are to have equal representation from thyssenkrupp and Tata. The codetermination structures in Germany, the Netherlands and Great Britain will be retained.
thyssenkrupp intends to contribute its Steel Europe business to the planned joint venture. There are also plans for the joint venture to include thyssenkrupp MillServices & Systems GmbH, a steel mill services provider that is part of the Materials Services business. Tata would add all of their flat steel activities in Europe.
The memorandum of understanding signed today paves the way for thyssenkrupp to involve employee representatives at thyssenkrupp AG and in the Steel business in the process ahead on an ongoing basis. All employee participation rights will continue to be respected as before.
In the months ahead, due diligence will be conducted. In the process, the negotiating parties will give each other access to confidential business documents to the extent permissible between competitors. Based on this as well as on discussions with the entire Supervisory Board, it is envisaged to sign a contract in early 2018. Closing – the effective start of the joint venture – could take place in late 2018 following antitrust approval by the relevant authorities.
Synergies within the joint venture
In the initial years – from closing onward – the joint venture partners plan to focus on establishing the joint venture and leveraging synergies. These are anticipated among other things from integrating sales, administration, research and development, joint optimization of procurement, logistics and service centers as well as improved capacity utilization in downstream processing. After the ramp-up phase, the joint venture partners expect annual synergies of €400 million to €600 million.
Additionally, the production network is to be reviewed starting in 2020 with the aim of integrating and optimizing the production strategy for the entire joint venture. It is not yet possible to quantify the additional synergies from this integration in detail. The scope for optimization also depends on numerous external factors such as the outcome of the Brexit negotiations and the implications that follow. Other external parameters include the development of the regulatory environment in areas such as emission trading and international trade policy.
The two joint venture partners expect that leveraging the cost synergies across the entire entity will require a reduction in workforce over the years ahead by up to 2,000 jobs in administration and potentially up to 2,000 jobs in production. This burden is expected to be shared roughly evenly between the two parties, which means a total of about 2,000 jobs at thyssenkrupp.
“We will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own. On the contrary: By combining our steel activities, the burdens for each partner are lower than they would have been on a stand-alone basis,” said Hiesinger.
The steel industry has faced massive challenges in Europe for many years: 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 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.
Reasons for partnering with Tata Steel
There are five reasons why combining the European steel activities of thyssenkrupp and Tata is the best possible next consolidation move:
Economies of scale: Economies of scale are a key success factor in a market caught up in ongoing consolidation. Combining the No. 2 and No. 3 in Europe results in a powerful new No. 2 for quality flat steel with a very competitive market position and promising growth prospects.
Complementarity: The businesses of thyssenkrupp and Tata are a good complementary fit. thyssenkrupp is stronger in the OEM sector while Tata’s strength lies with industrial customers. The main operating locations in Duisburg, IJmuiden and Port Talbot have good logistics links and serve customers in different, economically powerful regions. That makes for significantly broader overall coverage of customer sectors throughout Europe.
Performance orientation: The steelworks of thyssenkrupp and Tata rank among the most efficient facilities in Europe. Thanks to effective cost management, both producers operate at a profit. The two companies have paved the way for this over recent years, piece by piece and independently of each other: Tata, for instance, with the restructuring of Port Talbot and by selling long steel activities, and thyssenkrupp with the sale of CSA and capacity adjustment at HKM.
Innovative strength: Both partners aspire to quality and technology leadership in the European steel industry and continually develop innovative products and solutions for customers. High-tech steels are frequently the basis of industrial value chains in Europe and a key competitive differentiator.
Culture and capabilities: The two partners each have a highly capable and dedicated workforce who strongly identify with their company. thyssenkrupp and Tata have a cultural DNA equally characterized by the will to embrace change in order to secure their future. And both companies have the backing of strong shareholders through a trust structure that perpetuate the ideas and values of the original owners.
Further milestone on strategic way forward
Steel Europe will be accounted for on the balance sheet as a discontinued operation after signing. From closing of the transaction, the 50-percent share in the joint venture will be accounted for using the equity method, meaning based on the proportionate carrying amount of the investment. When the joint venture comes into effect, this will bring about a significant improvement in key balance sheet ratios for thyssenkrupp AG, most notably in the equity ratio and in gearing (ratio of net financial debt to equity). At the same time, the move creates a solid financial structure for the steel business.
The planned joint venture marks another key milestone on thyssenkrupp’s strategic way forward. In its evolution into a strong industrial group, thyssenkrupp has two priority aims: reducing dependency on the highly volatile steel business and enabling optimum development of all business areas.
Heinrich Hiesinger, CEO of thyssenkrupp AG: “We have always targeted the best solution for thyssenkrupp. A joint venture with Tata is the only option that addresses the structural overcapacities in the European steel market, that creates substantial added value through synergies and at the same time is in line with our corporate culture. This also marks a clear commitment to our roots, as the joint venture enables thyssenkrupp to retain its involvement in steel.”
High-strength 50mm diameter reinforcing steel bars in production at Pacific Steel, Ōtāhuhu.
Steel reinforcing bars made in Auckland for the City Rail Link project are the first of their kind to be manufactured in New Zealand.
The steel bars will help hold up the historic Chief Post Office when the rail tunnels are constructed beneath it and keep water out of excavation carried out below sea level.Difficult to source from overseas
Products like this are usually sourced from overseas, but this proved difficult for the CRL because offshore manufacturers could provide it only in quantities much greater than required.
CRL contractors Downer Soletanche Bachy liaised with New Zealand based suppliers over the possibility of manufacturing the bars locally, and Ōtāhuhu-based Pacific Steel took up the challenge.
Pacific Steel is New Zealand’s only reinforcing steel manufacturer. After successful trials, it has been engaged to make the bars, using local materials provided by New Zealand Steel in Glenbrook.Project more efficient thanks to NZ industry
Project Director Chris Meale said that, thanks to Pacific Steel coming to the party, the project has become much more efficient.
"It's great that our contractor has been able to work with a local business for mutual benefit and that in doing so we have created a first for the local steel industry," he said.
| An ourAuckland release || September 12, 2017 |||
The year’s winner of the international Swedish Steel Prize is Kiruna Wagon from Sweden on whom we ran an article on earlier in May. The prize was awarded for the company’s innovative wagon solution, the Helix Dumper. Kiruna Wagon has used high-strength steel to develop a highly durable and far more efficient wagon solution than other ore wagons on the market.
“Kiruna Wagon has successfully updated a good idea and used high-strength steels to turn it into a brand new, superior wagon solution,” says Eva Petursson, Chairman of the Swedish Steel Prize jury and head of SSAB’s Strategic R&D.
This year is the 17th time the Swedish Steel Prize has been awarded and the runners-up, were Fermel from South Africa, JMG Cranes from Italy and Wabash National from the USA.
Read more about the Swedish Steel Prize on www.steelprize.com and see the original article here.
Engineers say results from the Statistics House investigation will help build more resilient buildings.
New Zealand Society for Earthquake Engineering (NZSEE) President Peter Smith says every earthquake provides new information on how to improve building design.
“Investigations like this are crucial to making our buildings safer. We need to gain access to detailed information on how other buildings performed, to help widen understanding of whole-of-building performance.
“Statistics House illustrated how different factors can combine in unexpected and unprecedented ways.
“In Wellington, this earthquake most severely affected mid-height buildings. Because the earthquake was so far away, only low-frequency waves made it to the Capital. These waves resonated with mid-height buildings, which combined with the earthquake’s long duration meant mid-height buildings experienced severe shaking.
“Basically these flexible, modern buildings experienced a design-level earthquake – an earthquake that met or exceeded what they were designed to withstand.
“At the same time, shorter and stiffer buildings experienced an earthquake that wasn’t even one-third of Code. But these earthquake-prone buildings still pose a significant risk to public safety, especially in an earthquake centred closer to Wellington. It’s really important that vulnerable features on these buildings, such as parapets and facades, are secured during this time of heightened seismic risk.”
Structural Engineering Society (SESOC) spokesperson Paul Campbell says the Statistics House investigation has revealed that buildings with key characteristics may be vulnerable in an earthquake that’s both large and long.
“In a large and long-duration earthquake, these key characteristics are flexible frames in combination with precast floors.
“Flexible frames are designed to bend so that the ends of the beams experience controlled damage.
“But the Kaikoura earthquake has confirmed that if an earthquake is strong enough and long enough, the damage can make the beams grow in length. This means the supports for the pre-cast floor system can move too far apart, potentially causing parts of the floor to lose their support and collapse.
“When Statistics House was built, the Building Code did not allow for this combination of factors – but it does now.
“The Canterbury earthquakes led to Building Code changes – and now more changes are likely given what we have learned from the Kaikoura earthquake.
“Engineers will be working with MBIE to further develop detailed guidance on assessing and retrofitting buildings with these characteristics.”
| An IPENZ release | March 31, 2017 |||
SESOC and NZSEE are IPENZ technical groups.
The first three months of 2017 have brought several surprises that can possibly impact the global transformer industry. These article series will examine the possible impacts that these events could have on the global transformer industry. Only time will tell which if any of these events will come to pass.
January 2017 saw the inauguration of a new president in the United States and a major shift in how the U.S. will look at the world as stated by President Trump in his inaugural address, ‘Buy American & American Made’ being a prime focus. ABB announcing the close of a plant in New Zealand. The British Parliament’s vote to confirm BREXIT. And finally the commissioning of a new GOES production line in Brazil. These are just a few of the events that we examine.
Part I of this report will concentrate on events that can possibly impact global transformer manufacturers. Part II will focus on the possible impacts to the North American transformer industry.
Let’s start with recent BREXIT vote in the United Kingdom. We now know that the UK Parliament will activate Rule 50 on March 29th. In response the EU Commission has stated that terms of the departure will be such that no other country will want to leave the EU.
What will BREXIT do to the transformer industry? Will the UK maintain the import duties on grain oriented electrical steel (GOES)? What about efficiency standards?
Duties on GOES crossing the Channel?
At this point UK does have a mill producing grain oriented electrical steel (GOES), the CORUS Division of Tata British steel. It is possible that with BREXIT that the EU will look at this mill in the same light that they have with mills in Japan, China, South Korea, Russia and the United States. In that case there would be duties on GOES crossing the Channel.
Which brings us to the Tata British Steel / ThyssenKrupp joint venture. Currently Tata British Steel is in negations with ThyssenKrupp to merge Tata’s specialty steel division. Will ThyssenKrupp want to have production facilities across the Channel in a non-EU country with the possibility of import duties, or will they want to move that capacity into their plants in France and Germany?
Experts stated in 2016 that the UK, on its own, could not meet the EU 2020 Efficiency Standards. Not being a member of the EU, will they decide to adhere to the 2020 Efficiency Standard or will they decide to adopt a less strict standard. If the UK adopts a less strict standard will UK transformer companies be forced to produce a line of transformers for export to the EU and a separate design of the UK.
In recent years we have seen the EU transformer industry out-sourcing their transformer core manufacturing. Much of this has gone to Turkey and the Middle East. Some of the reasoning for this has been the duties imposed by the EU on imported GOES and the continued efforts to reduce costs.
EU transformer manufacturers should be concerned about their supply chain
With the relations between the EU and Turkey becoming more strained, should European transformer manufacturers be concerned about their supply chain, not only, for cores but also magnet wire.
The global GOES supply is undergoing changes also.
In 2016 Allegheny Technologies announced that they were leaving the GOES market, while in China the merger of Baosteel and Wuhan Iron & Steel (WISCO) was announced. This meant that the United States lost one of it’s two GOES producer and 115,000 tons of capacity.
The merger of Baosteel and WISCO could represent a reduction in Chinese GOES capacity since neither company has been operating their GOES facilities at capacity for at least the past year.
Just recently AK Steel has stated that they expect reduced shipments of GOES through the first half of 2017.
To offset these concerns, Aperam has just commissioned a new GOES processing line at their Brazilian operation allowing them to produce HiB. This would be a first for South America.
In India, late 2016 the Russian steel producer NLMK signed a LOI with the Indian government to build a mill in India capable of producing GOES. Maybe they will have better luck than POSCO.
| A Power Transformer release | March 27, 2017 |||
A number of US steelmakers are expanding capacity and upgrading mills in the same region where Australian company BlueScope Steel operates its highly profitable North Star mill.
According to BlueScope, its North Star mill in Ohio achieved a profit of $211 million in the first half of 2016-17, which accounted for 35 per cent of its overall profit. This is double the profit from the year prior.
With rivals getting wind of this, a number have announced expansions and upgrades of their Ohio plants, supported by new policies from US President Donald Trump designed to stimulate local manufacturing.
For example, Nucor recently announced its plan to spend US$85 million (AU$111 million) to upgrade a steel mill in Marion, Ohio, in order to keep a “cost-competitive position”. Charter Steel also announced its plan to build a new $150 million steel mill in Cuyahoga Heights in Ohio, and US Steel has stated its intention to spend up to US$200 million on steel mill expansions.
According to Deutsche Bank analyst Paul Young, producers are being incentivised to bring under-utilised capacity back into market as demand increases. Despite Trump’s protectionism policies and higher tariffs on imported steel, increased US steel mill utilisation is expected to limit profit margin expansion, said Young.
| A ManufacturersMonthly release | March 27,2017 |||
Seismic grade steel reinforcing bar that is not as strong as it should be has been sold in the New Zealand market according to a RadioNZ report aired earlier today.
The report voiced the concerns of a Wellington builder who grew suspicious about the quality of the bar he was using when he found it to easy to bend.
Imported by Euro Corp and distributed by Bunnings the product, according to this report, originates from Amsteel in Maylaysia.
You can read the full report here
Wouldn’t it be cool to have something as hard as steel and still malleable? Researchers from Hokkaido University in Japan have gotten a one up on this thought, they’ve built a new hydrogel material that has been reinforced with fibres and according to them it is five times harder to break than carbon steel. Along with this use the material is also very easy to bend and stretch.The researchers made a material that’s super tough and flexible at the same time
The researchers developed the fabric which is called fibre-reinforced soft composite (or FRSC). They did this by combining hydrogels- containing very high levels of water- with glass fibre fabric. The process of combining two materials together to get the best mix of both their properties is something that has been going on for a long time. This is a useful technique and can be used to create some really wonderful things. The idea is that you end up with a better product than the two standalone source materials.
Creating a substance that could easily bear heavy loads and was also very resistant to fractures was something that the scientists set out to create. These traits were easily found in hydrogels while the extra rigidity and durability was provided through the glass fibre fabric.
Just imagine the uses that this material could have. One good use would be building artificial ligaments or tendons for people who have ruptured their original ones. It could also be alternatively used in the fashion industry for manufacturing a very elastic but tough material.
| Originally published wccftech | March 07, 2017 ||
According to a report from China’s central government, production of steel and aluminium by producers in over two dozen cities will drop significantly over the winter months. The move is seen as another salvo in the ongoing battle against smog.
The document, which is a joint statement from the Ministry of Environmental Protection (MEP), Finance Ministry, National Development and Reform Commission (NDRC) and the National Energy Bureau, in conjunction with local governments, carries a date of February 17, also includes plans to limit coal use in Beijing as well as pulling back on coal transport to northern China.
According to the document, steel producers in the provinces of Hebei, Shanxi, Shandong, Henan, Tianjin, and within the city of Beijing will be called upon to cut production in half during the peak heating months between November and February, inclusive. The amount of steel capacity to be curtailed is dependent upon the emission cuts to be made in the region, per the report.
The document details cuts in aluminium capacity by over thirty percent and alumina by nearly the same amount in those cities as well. Cuts in Hebei, Henan, and Shandong are particularly significant, as seventy percent of China’s total aluminium production is located in those three provinces.
The cuts would see China’s yearly steel output fall by 8 percent per annum and aluminium output lowered by 17 percent per year, according to calculations performed by Reuters, the news service that originated the story.
In addition to capacity cuts, the transportation of coal will be limited to railroad in Hebei and Tianjin, eliminating trucks as a method for transport starting in September. As the lion’s share of aluminium production in China is powered by coal-fired power plants, the implication for aluminium production is obvious.
China has long been battling smog, and this winter’s air quality has proven to be the worst in decades. Heavy industry, coal burning for heat in private homes, and increased transportation has taken a toll on air quality in cities like Beijing, which finds itself engulfed in even worse levels of smog than normal.
| From Aluminium Insider | March 01, 2017 ||
AutoInformed.com on Chinese Steel DumpingThe Australian Workers’ Union (AWU) announced at its National Conference that it will take legal action against Chinese steel dumping. Newly elected national secretary Daniel Walton said that the union would lodge a complaint with the government’s Anti-Dumping Commission. The resolution calls on the Commission to impose a significant tariff on Chinese steel. “Dumping is cheating,” it says.
The Commission has the power to impose tariffs to address dumping. However, in 2004, Australia became one of only two major developed economies to grant market economy status to China (after New Zealand), severely hampering its policy options for addressing Chinese steel dumping.
“Chinese dumping has put our manufacturing sector on the brink of collapse,” he said. “There can be no place for trade cheats.”
Walton explained that vast sums of money are being spent by the Australian government on infrastructure projects that use no Australian steel. At the same time, more than 8,000 workers at the Arrium steel plant in South Australia face an uncertain future as it went into administration (bankruptcy) last year.
The AWU is holding its National Conference on the Gold Coast in Queensland this week. Following a panel discussion on Chinese dumping, where experts debated the effects of dumping on the domestic market and strategies to fight it, delegates passed an anti-dumping resolution, accusing China of flooding the international market with 100 million tons of steel sold at prices below the cost of production.
The steel industry is in crisis across the world, of course, and IndustriALL affiliates are taking action to defend the industry and the jobs it provides. In November last year, thousands of steel workers marched through Brussels to demand action on dumping.
An action plan was adopted at IndustriALL’s base metals conference in Duisburg, Germany, committing affiliates to coordinate initiatives to oppose market economy status for China, on the grounds of unfair trade practices. In 2004, Australia became one of only two major developed economies to grant market economy status to China (after New Zealand), severely hampering its policy options for addressing Chinese dumping.
IndustriALL will participate in the next OECD Steel Committee on 23-24 March and together with affiliates, as well as in the G20 forum on steel overcapacity, for measures to be taken against dumping.
IndustriALL assistant general secretary Jenny Holdcroft, who was at the AWU National Conference, said:
“This is neither free nor fair trade when a country subsidizes its own industries at the expense of workers, their jobs, families and communities, in other countries. The AWU has taken an important step by demanding that its own government stands up to dumping. We will support them, and coordinate with our affiliates in the steel industry across the world to develop a united trade union response.”
| An AWU release | March 02, 2017 ||
Palace of the Alhambra, Spain
By: Charles Nathaniel Worsley (1862-1923)
From the collection of Sir Heaton Rhodes
Oil on canvas - 118cm x 162cm
Valued $12,000 - $18,000
Offers invited over $9,000
Contact: Henry Newrick – (+64 ) 27 471 2242
Mount Egmont with Lake
By: John Philemon Backhouse (1845-1908)
Oil on Sea Shell - 13cm x 14cm
Valued $2,000-$3,000
Offers invited over $1,500
Contact: Henry Newrick – (+64 ) 27 471 2242