July 8, 2020 / 10:25 AM / a month ago

Salzgitter CEO sees no immediate need for M&A

FRANKFURT (Reuters) - Germany’s second-largest steelmaker Salzgitter (SZGG.DE) sees no benefit from consolidation for now, Chief Executive Heinz Joerg Fuhrmann told shareholders on Wednesday, in a rebuff to its major rival Thyssenkrupp (TKAG.DE).

Sources had told Reuters in May that Thyssenkrupp was looking for alliances or sell-offs to restructure and cut debt. Also in May, its CEO said Salzgitter was one of the options.

“We currently do not see any such scenario that would improve our competitive situation as compared to remaining independent,” Salzgitter’s Joerg said in a speech at the company’s annual general meeting.

Fuhrmann said there was no immediate pressure on Salzgitter for any consolidation but his stance did not preclude discussions on cooperation, should they be of potential benefit to the company.

Sector analysts have nurtured the idea of consolidation both at national and international level to improve profitability as a defence against fierce global competition, mainly from China.

Labour representatives also support the idea of a national German steel champion.

Fuhrmann said Salzgitter’s strategy to weather an industry crisis, which predates the COVID-19 pandemic, was to rely on steel activities for half of its portfolio and other sectors for the other half.

He also said Salzgitter would move to green steel production, mainly by replacing natural gas with hydrogen produced sustainably.

Salzgitter plans to install wind turbines with a capacity of 30 megawatts (MW) on its main plant site, where a 2.5 MW electrolysis plant will make carbon-neutral hydrogen.

The company had pre-emptively covered much of its output up to 2030 with EU carbon emissions allowances, giving it time to complete the new strategy.

It is also assessing a venture to produce sponge iron from green hydrogen at Wilhelmshaven on Germany’s northern coast and transport this to Salzgitter in northern Germany by rail.

Reporting by Tom Kaeckenhoff and Vera Eckert, editing by Riham Alkousaa and Barbara Lewis

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