ThyssenKrupp, Tata to merge European steel operations

German heavy industry giant ThyssenKrupp and Indian group Tata agreed on Wednesday to merge their steel operations in Europe, taking second place in the continent's market behind ArcelorMittal.

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

Trade unions at ThyssenKrupp and German officials have for months been fearing news of job losses, which would be divided roughly equally between the two groups.

ThyssenKrupp must now submit the plan to its supervisory board -- where worker representatives hold half of the seats -- for approval at a meeting this weekend.

Powerful union IG Metall complained earlier this week of a "total dearth of information" from executives about the deal.

Vice-Chancellor Sigmar Gabriel backed the unions Monday, saying "no solution can be imagined that runs contrary to the workers."

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.

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

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

"Steel demand is characterised 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.

More upbeat than Germany's Gabriel, British economy minister Greg Clark hailed an "important step" for the island nation's steel industry.

London hopes the deal will secure the future of Tata's 4,000-strong site at Port Talbot in Wales, which sits at the heart of the local economy.

"As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production" in the UK, said trade union representative Roy Rickhuss, while adding that workers "recognise the industrial logic of such a partnership".

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

Source: AFP