ThyssenKrupp AG, Germany’s biggest steelmaker, intends to save 500 million euros ($670 million) by reorganizing its European steel business and cutting more than 2,000 jobs to reduce excess capacity.
ThyssenKrupp is considering “the closure, relocation or sale of business units and facilities,” the Essen-based company said in a statement today. Plants in Germany’s Ruhr region and Spain may be affected by the plan. Asset disposals could lead to a further 1,800 employees leaving the company.
“The Steel Europe business area’s new management team has developed a package of measures to sustainably improve the steel unit’s profitability and competitiveness,” ThyssenKrupp said. “The optimization program plans to achieve a savings volume of around 500 million euros by the 2014 to 2015 fiscal year.”
European steelmakers are grappling with unneeded furnaces whose output is weighing on prices. The region can produce about 210 million metric tons of steel a year, while demand in a “normal market” is 150 million to 160 million tons, according to industry lobby group Eurofer.
Steel-industry earnings have slumped as Europe’s economic crisis saps demand and slower Chinese growth weighs on commodity prices. ArcelorMittal, the biggest producer, this week reported its lowest quarterly profit in three years. The Luxembourg-based company has shuttered plants and cut jobs in Europe as it moves output to cheaper sites.
“The European steel industry faces major challenges,” ThyssenKrupp said, citing high energy and raw material prices, economic uncertainties and reduced consumption.
ThyssenKrupp is selling its Steel Americas and stainless steel units as it cuts the number of business units to five from eight while expanding non-steel operations. Waning demand from the auto and construction industries has pushed down steel prices and squeezed producers’ profit margins.