The Czech company collector is now also betting on German steel: Daniel Křetínský, one of the richest Europeans, is buying into Thyssenkrupp’s struggling steel subsidiary with his holding company EP Corporate Group (EPCG). The announced the Essen-based conglomerate on Friday. In Germany, the publicity-shy Křetínský already owns almost half of the shares in the wholesaler Metro; The 48-year-old also bought Vattenfall’s East German lignite division. EPCG also owns shares in energy, media, trading and logistics companies in other European countries.
EPCG will initially take over 20 percent of the shares in Thyssenkrupp Steel Europe. The deal is expected to be completed by late summer. The Czechs will later increase their shares so that Thyssenkrupp and EPCG will each hold 50 percent of the subsidiary in the long term. This operates Europe’s largest steelworks in Duisburg; 13,000 of the 27,000 employees work there. However, management wants to reduce the capacity of the poorly utilized location. That could cost more than a thousand jobs. Union representatives are irritated anyway – and have expressed criticism of the move.
In contrast, Thyssenkrupp’s CEO Miguel López describes the agreement as a “historic step”, important not only for his subsidiary but for the entire German steel industry. The industry is suffering from high energy costs and cheap imports from China; At Thyssenkrupp Steel Europe, the most important customer, the automotive industry, is also weakening. At the same time, companies must invest billions in switching to climate-friendly steel production.
Thanks to the partnership with the Czechs, these investments should be easier to manage. In the future, pig iron will no longer be produced with coke and coal in blast furnaces, but rather with the help of climate-friendly hydrogen in so-called direct reduction plants. Thyssenkrupp Steel Europe is already building one of these in Duisburg, for a mere three billion euros. The federal and state governments are supporting the groundbreaking project with two billion euros in subsidies. However, this green steel production requires huge amounts of hydrogen and green electricity.
The Czechs should supply green electricity
The collaboration with Křetínský should also help here, because EPCG operates many power plants and invests heavily in green electricity systems. In Germany alone, the Czechs want to build wind and solar parks with an output of more than eight gigawatts by 2030. For comparison: Germany’s most modern hard coal-fired power plant, Datteln IV in the Ruhr area, can deliver one gigawatt. EPCG’s entry into Thyssenkrupp Steel Europe is intended to ensure that the steelworks are supplied with green electricity and climate-friendly hydrogen. For the green transformation of the industry, “a strong energy partner like EPCG is essential,” says CEO López. While energy currently accounts for ten percent of the production costs for steel, in the future it will account for up to 50 percent.
The two companies remain silent about the purchase price. It remains to be seen whether Thyssenkrupp will receive large amounts of money; after all, pension obligations of more than 2.6 billion euros are burdening the steel subsidiary and depressing its value. Negotiations with Křetínský also took longer than López had hoped. The former Siemens manager, who has led Thyssenkrupp since last summer, initially aimed for a deal by the end of October.
The German-Spanish is not the first Thyssenkrupp boss to look for buyers or investors for the steel division. At the turn of the millennium, the then chairman of the board, Gerhard Cromme, wanted to take the division public, but this was not successful. Later mergers with rivals Tata and Liberty Steel failed. López’s predecessor, Martina Merz, also wanted to bring a partner on board. The fact that this failed was the main reason for her resignation.
The steelworks has to shrink
The fact that Křetínský felt called upon to enter the steel industry is apparently linked to his experience at power plants. In the announcement about the deal, he is quoted as saying that Europe’s steel sector will undergo a similar green transformation as the energy sector. Only EPCG board member Jiří Nováček answered questions from journalists. He emphasized that his holding company only wanted to hold 50 percent of the steel company in the long term and no more. And he also ruled out a stake in the Essen parent company Thyssenkrupp.
López justifies the fact that the Czechs are only buying 20 percent of the shares in the first step with the upcoming downsizing at the steel subsidiary. Management is currently developing a plan to reduce the capacity of the underutilized Duisburg location by a fifth. This should make the steel mills more profitable again. In such a transitional phase, a 50-50 partnership was “impossible,” says the 59-year-old. The fact that EPCG got involved so early is because the Czechs “want to be actively involved” in the reorientation of the subsidiary. He hopes this will speed up the renovation.
If individual blast furnaces in Duisburg are closed, it could cost an estimated two thousand jobs. However, a collective agreement prohibits dismissals for another two years. The IG Metall union has invited people to a works meeting at the Duisburg football stadium next Tuesday, with Federal and State Labor Ministers Hubertus Heil and Karl-Josef Laumann speaking, among others. However, CEO López will not be traveling from Essen and prefers to send division boss Bernhard Osburg.
IG Metall complains about bad style
On Friday, IG Metall board member Jürgen Kerner complained that he had not been informed about the agreement with EPCG sooner: The employee representatives had “only found out about the decision a few hours before the public – that’s not good style,” said Kerner, who is also deputy head of the Thyssenkrupp supervisory board. General works council chairman Tekin Nasikkol assured that the union would “carefully and critically evaluate” Křetínský’s plan when it is presented.
At least the agreement was well received by Thyssenkrupp’s battered shareholders: the major shareholder “Alfried Krupp von Bohlen und Halbach-Stiftung” announced that it would welcome EPCG’s participation. And the share price rose by ten percent immediately after the announcement.