Thyssenkrupp continues to explore steel unit sale

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Thyssenkrupp’s prospective plans to separate Thyssenkrupp Steel (TKS) into a standalone company indicate a plan to sell it, industry watchers said, though they questioned what kind of price the German conglomerate would ultimately receive.

“Everybody knows that it has been an exceptional year,” one trader said about steel prices and demand.

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Thyssenkrupp favors ‘stand-alone’ solution for steel unit

ThyssenKrupp

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That comment followed Thyssenkrupp’s late November announcement of plans to split Thyssenkrupp Steel (TKS) from the rest of the group.

“Thyssenkrupp is still convinced that a stand-alone solution offers the best future prospects for Steel Europe. However, spinning off the steel business is a very complex undertaking characterized by economic challenges and a large number of uncertainties. A final decision will depend on many factors, some of them external,” the conglomerate said Nov. 18, when it announced its financial results for 2020/21.

“As well as addressing the usual carve-out issues, Thyssenkrupp is currently conducting a feasibility study to explore which conditions are required to achieve a stand-alone solution for the steel business,” the group added.

TKS’ adjusted earnings before income tax (EBIT) came to €116 million ($438 million) for its 2020/21 fiscal year ending Sept. 30. That compared to a loss of €820 million ($925 million) for the previous fiscal year.

Revenues for that year totaled €8.93 billion ($10 billion), the subsidiary said on Dec. 2, up by a quarter from 2020-2021, TKS noted.

Shipments rose 13.6% to 10 million metric tons from 8.8 million metric tons, the steelmaker’s information also indicated.

The trader also believed that accounting could be one of the reasons the parent group is seeking to sell TKS.

“Maybe they can split off the profits and show that it is a very profitable company,” the trader added.

TKS noted that its mid-term EBIT target for 2021/22 was greater than €700 million ($793 million) against sales exceeding €10 billion ($11.3 billion).

TKS’s main plant is in Duisburg, in Germany’s North Rhine Westphalia State. The site can pour 13 million metric tons per year of crude steel, which it produces via four blast furnaces and two basic oxygen furnaces. The plant then casts slab for rolling into hot and cold rolled coil, as well as plate.

Other products at the plant include non-grain- and grain-oriented electrical steels, along with downstream coated products, such as hot dipped galvanized sheet, tinplate and prepainted.

TKS also has other sites in Germany and in Spain for rolling and downstream services, information on its website shows, in addition to sales offices in France and Switzerland.

Thyssenkrupp’s business areas include components technology, elevator technology as well as industrial solutions. Steelmaking was the group’s core activity since 1811 when Friedrich Carl Krupp established a cast steel plant in Essen, though the group is now looking at realigning its interest.

Spinoff proposals

In fact, Thyssenkrupp has discussed the concept of separating TKS since at least 2015, a second analyst told MetalMiner.

Thyssenkrupp attempted to sell the steelmaker earlier in 2021, though without any success. Liberty Steel expressed interest in TKS, though the German parent ended talks with the London-headquartered in February over the price.

Thyssenkrupp had sought approximately €1.5 billion ($1.7 billion) for its steelmaking unit. Meanwhile, Liberty wanted to receive it either for nothing or with extra payment.

The company also announced an agreement with India’s Tata Steel to merge their European steelmaking businesses in a 50-50 joint venture. However, the European Commission blocked the transaction on competition concerns.

Thyssenkrupp agreed to sell Italian stainless producer Acciai Speciali Terni (AST) to steelmaking group Arvedi in September for an undisclosed sum. Tentative completion of the deal is for mid-2022, the conglomerate stated.

AST is approximately 100 kilometers northeast of Italian capital Rome. The plant can produce stainless flats and tubes for transport, white goods and architecture sectors. It can also produce stainless steel for the industrial sector.

The group also exited its steelmaking activities in the Americas after selling its CSA plant to Ternium for €1.5 billion, four years after it sold its steel business in the United States to ArcelorMittal and Nippon Steel for $1.55 billion.

European steel prices

Economic recovery from the COVID-19 pandemic in Europe and government stimulus programs have helped to push up flats prices in northern Europe.

Luxembourg-headquartered ArcelorMittal was offering hot rolled coil in late November at €1,080 ($1,225) per metric ton exw for December rolling / January delivery. Deals took place at closer to €1,050 ($1,190), trading sources said.

Those prices are lower than in June, when sources confirmed deals at €1,120-1,130 ($1,270-1,280). Nonetheless, they remain 75% higher than in late November 2020, when HRC was about €600 ($680) on the same terms.

Construction, auto demand

Market sources noted that construction activity into Europe’s winter has supported prices, but they also pointed to lower auto demand.

New automobile registrations in the European Union totaled 665,000 units for October. Registrations dropped more than 30% year over year from 950,000 units, the European Automobile Manufacturers Association (ACEA) said Nov. 18.

Those current high prices also prompted the analyst to give a caveat.

“Prices are higher at the moment, but are they going to be like this in three years’ time?” one analyst asked.

A prospective buyer for the Duisburg plant faces increasing pressure from Germany’s federal government, as well as from the European Union, to further decarbonize the plant. Yet, the concept of green steel is still in its infancy, the analyst warned.

People will want to put their money into nickel or copper projects either in Europe or elsewhere as battery technology becomes more prolific, rather than in steel, the source stated.

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