Steel amalgam

18 May 2015 By Olaf Storbeck

The 15 bln euros engineering group has overcome its existential crisis. ThyssenKrupp is now strong enough to consider consolidation in steel-making, which is dogged by low company margins and industry overcapacity. Hammering out a JV with a European rival could be a fix.

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ThyssenKrupp’s Steel Europe division more than doubled its operating profit to 193 million euros in the six months to March, the first half of the group’s fiscal year, the German company said on May 12. The unit’s EBIT margin for the same period rose to 4.5 percent, up from 1.6 percent a year earlier. Steel production rose slightly to 5.7 million tonnes, but lower prices led to a 4 percent decline in revenue.

Steel Europe is one of six business units, accounting for 20 percent of sales. It is Europe’s third-largest steel producer after ArcelorMittal and Tata Steel Europe.

The industry suffers from overcapacity, according to McKinsey estimates, with total production of 174 million tonnes in 2014 running 39 million tonnes below capacity. Without industry consolidation, the management consultancy reckons overcapacity will continue, declining only slightly to 30 million tonnes by 2020.

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Steel Europe is one of six business units, accounting for 20 percent of sales. It is Europe’s third-largest steel producer after ArcelorMittal and Tata Steel Europe.

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