2024-04-17 14:25:30
Thyssenkrupp wants to reduce its production capacities. This will cost jobs and could have an impact on the entire industry.
A big bang for the traditional Ruhrpott company: Germany’s largest steel manufacturer Thyssenkrupp Steel wants to significantly reduce its production capacities in Duisburg.
Production is to be reduced by 22 percent and this will also be accompanied by job cuts. It is still unclear how many jobs will be cut. “It is the declared goal to continue to avoid redundancies for operational reasons,” said the company statement.
Admittedly, the announcement had already become apparent, so it doesn’t come as a complete surprise. It is still startling news for the industry and the business location as a whole.
Weak economy, high energy prices
After all, 27,000 people work at the Essen-based company. An employment guarantee applies until 2026, but what happens after that is unclear. Because Thyssenkrupp wants to reduce the sales volume from 11.5 million tons to 9 to 9.5 million tons of steel.
For comparison: in 2023, the entire German steel industry produced 30.6 million tons of hot-rolled steel products. The company emphasized that the targeted volume of 9 million to 9.5 million tons corresponds to the level of the past three years.
The fact that Thyssenkrupp now has to make cuts is also due to wrong management decisions in recent years. Large sums were invested in the USA and Brazil, which ultimately did not pay off. Under the then CEO Martina Merz, the corporate strategy was repeatedly adjusted, but without lasting success. In the 2022/23 financial year, the group with its five divisions made a loss of 2 billion euros on sales of 38 billion euros.
But not all of the reasons for the downturn lie solely in the Essen company. Above all, high energy prices, the persistently weak economy and “fundamental structural changes on the European steel market” also played a significant role in the decision, according to Thyssenkrupp.
Cheap imports
Added to this are the growing cheap imports, especially from Asia, which lead to “reduced industry competitiveness”. With state subsidies, China is boosting overproduction in its own country and pushing products onto the world market at significantly lower prices. The EU is therefore currently conducting an investigation in the automotive sector – an important consumer market for steel. It is intended to clarify to what extent prices on the European market are being kept artificially low – much to the annoyance of the Chinese authorities. You can read more about Chinese competition in the automobile market and state influence here.
An additional burden is the conversion of steel production to so-called “green steel”. This commonly refers to steel that is produced using green hydrogen. Politicians have announced in the past that they will support companies in switching to green steel. The Green Economics Minister of North Rhine-Westphalia, Mona Neubaur, described the decision at Thyssenkrupp as “disappointing news”.
However, the federal and state governments are supporting companies in switching to climate-neutral production with two billion euros. But that won’t be enough, because converting a single blast furnace to green hydrogen costs three billion euros. In Duisburg alone, where cuts are now to be made, the group currently operates six such ovens, and there are other locations as well. Thyssenkrupp is expecting transformation costs of around 18 billion euros.
The company emphasized that it would continue to convert production towards climate-neutral steel production. “The construction of the first direct reduction plant at the Duisburg site will continue to be implemented as planned, with support from the funding released by the federal and state governments.” The goal of producing climate-neutral production by 2045 at the latest also remains. The plant will replace a blast furnace. It is scheduled to start in 2027 and will later be operated with climate-friendly hydrogen. The federal government and North Rhine-Westphalia are funding the project with two billion euros.