German giant lightens reliance on heavy metal and goes techno

While most steel companies seek to benefit from China's large-scale infrastructure construction projects, one company has decided to capitalize on the country's development by reducing its dependence on steelmaking.

"We are not a steel company," says Heinrich Hiesinger, CEO of Thyssen- Krupp AG, an industrial giant with a long history of working in China. I want people to consider us as a technology company rather than a steel producer."

Although the company has adopted new ways to expand its businesses in more technological areas, the name Thyssen- Krupp is still associated in China with the German arms manufacturer of the 19th century.

But after developing into an international steel maker over the past century, the company is now reorganizing itself into a technology-driven group. And China plays a big role in that transformation.

In October ThyssenKrupp announced it would sell Tailored Blanks, one of its automotive-steel manufacturing units, to Wuhan Iron and Steel Group Co, the fourth largest steel maker in China.

Wuhan Steel was planning to expand by moving from the upstream production of crude steel to the more refined downstream manufacturing sectors to increase its high-end products share.

Tailored Blanks makes lightweight steel sheets for the automotive industry. The company accounts for 40 percent of the global market for such products. Its annual sales in 2011 were 700 million euros, the company says.

"It's a very clear path that we are following, to become a technology-based corporation and an industrial solution provider," Hiesinger told China Daily during an innovation and technology event near the company's headquarters in Duesseldorf.

At the event, up to 4,000 ThyssenKrupp engineers demonstrated the company's work in science and technology to visitors.

Asked the reason for his company's transition from heavy to light and less steel, Hiesinger says huge overcapacity in the global steel industry makes it very difficult to be profitable in the business.

"Ten years ago the steel industry started to see the overcapacity problem, so we changed to the stainless steel business, which brought us profits in the following years. However, the same problem now is happening to the stainless steel industry too, including in the Chinese market."

In late January 2012, ThyssenKrupp announced the sale of Inoxum, the company's stainless steel business, to Outokumpu Oyj, a Finnish stainless steel producer.

The transaction agreement valued Inoxum at about 2.7 billion euros, German media reports said.

"By selling the stainless steel business, we can spare more resources to other sectors with good potential," Hiesinger says. "The investment should go to sectors which can create bigger value. The growth rate, profitability and capital efficiency are three main standards for our business assessment."

ThyssenKrupp is now considering selling its other steel factories in Brazil and the US, and is in talks with more than 10 companies. The company has decided to maintain the scale of its steel business in Europe because it is still profitable, especially in high-end products such as automotive-steel plates.

"Our management philosophy is to produce lower quantities with higher profits," Hiesinger says. However, he adds, that does not work in China because manufacturers are not keen on paying top prices for high-quality steel products. But Hiesinger stresses that China is important to ThyssenKrupp.

"I have been stressing the importance of China's role for our company since I became the CEO of ThyssenKrupp in early 2011. I require that every business section's performance rating in China should be higher than the average growth rate of their competitors in the country."

About 5 percent of the company's revenue now comes from China. Hiesinger said the figure will double after the company's portfolio optimization.

China's slowdown and reduced demand for steel from infrastructure and construction projects since 2011 have greatly affected the domestic steel industry, but not ThyssenKrupp, as crude steel is not its major business in the country.

"All the businesses we are running in China fit the local market well, but we are not satisfied with that," Hiesinger says. "We will keep expanding our businesses in China."

The company is setting up five new projects in the country: an engine components factory in Nanjing, Jiangsu province; an elevator factory in Guangdong province; separate camshaft and dampener projects in Shanghai; and a mechanical spring company in Chengdu, Sichuan province.

dujuan@chinadaily.com.cn

(China Daily 02/22/2013 page11)