New German Furnace, $2.4 Billion Brazilian Mill and Designs on North American Market from Confident ThyssenKrupp

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Researched by Industrial Info Resources (Sugar Land, Texas). As the world steel industry stays alert to the effects of a slow down in Chinese consumption, the possible Mittal-Arcelor take over, and the iron ore price setting sessions between China and the Australian and Brazilian miners, ThyssenKrupp Steel (TKA.DE) (Essen, Germany) is investing in major updating and modernization of plants and making moves to develop a globally integrated steel production and steel product network.

At the company’s hot metal base in Duisburg-Hamborn, Germany, a new blast furnace is being constructed on the site where obsolete blast furnace 8 was closed down in 1991. In 2005, the Dusseldorf district authority granted approval for the construction of a new blast furnace 8, which will take an investment of $254 million. The site is being cleared and prepared in the existing infrastructure of the ThyssenKrupp Steel plant premises. Construction materials from the rubble of the old blast furnace 8 are being recycled for backfilling on the site and scrap metal from the old furnace has been fed to the converter.

The blast furnace project is scheduled for completion in 2008, with a total investment of $430 million. The company says that the project will stabilize the hot metal base in Duisburg for the production and processing of steel at its German plants and it will improve productivity and optimize logistics.

Blast furnace 9, built in 1987, will be relined and upgraded to a state-of-the-art unit and the 1963 vintage blast furnace 4 will be shut down and kept as a back-up unit. Feeds to the entire site are currently under reconstruction. A complex of pipelines carrying blast furnace and coke oven gas, steam, cooling and drinking water and compressed and heating air will be laid and enclosed. When this part of the project has been competed, old pipelines supplying the total steelmaking plant will be phased out of service. A new 200-meter long stockhouse will be completed in 2007 to serve the blast furnace and the existing blast furnace 9.

Work starts this month on casting foundations using 5,000 tons of reinforced concrete, which will be followed in September by the start of the blast furnace construction. Paul Wurth (Luxembourg, Arcelor holds a 48.1% stake) will execute the supply, installation and start-up of the blast furnace tower and shell, casthouse, the pulverized coal injection plant, inclined elevator and cooling system for the core units. Some of the units will be prefabricated and assembled on site. ThyssenKrupp will put other items out to tender. These include top gas scrubbers, and a new state-of-the-art central control station for units 8 and 9.

By the time the new blast furnace is blown in during December 2007, 10,000 tons of steel will have been used in the project. Full capacity will be reached in the first quarter of 2008. An investment of $25 million will be made in furnace dedusting systems for the hopper car discharging station and the cooling system for furnace 8 will be fitted with a low-noise, slow rotating ventilator. The cooling tower for slag granulation on furnace 9 will be moved to the center of the plant to eliminate noise pollution for local residents. In a final touch, many smoke stack lengths away from the days of the grim old Ruhr iron and steel belt, the new unit will be given an attractive designer color scheme to set it apart from the older units.

A key element in the company’s integrated growth strategy is the mid-May board approval to invest $2.4 billion in a Brazilian steel plant, which will be operated by Companhia Siderurgica do Atlantico (CSA) and is scheduled to start production in 2009. To be constructed at a site in Sepetiba in Rio de Janeiro state, the mill will supply low-cost, high-quality slabs from Brazil to harness opportunities in the core European market and in the NAFTA region. Dr Ekkehard Schultz, Chairman of the Executive Board, said, “Our objective is to position ourselves globally in the market for high quality flat carbon steel.”

Another target is to achieve a 5% share of the high-value market in North America. A feasibility study is being drawn up for a Greenfield option with rolling and coating capacities of 4.5 million tons of end products per annum. Total investment in the project could be $1.8 billion. If ThyssenKrupp acquired Canadian steelmaker Dofasco, the options would shift. The current situation is that Mittal Steel might have to give up on Dofasco if it successfully pursues Arcelor.

ThyssenKrupp has laid these plans based on a belief in the continuing strong world steel demand growth. The initial plan of 4.4 million tons of annual production for the Brazilian steel mill has been raised to 5 million tons. Two million tons will ensure the full utilization of the German processing facilities where bottlenecks are being eliminated through expansion investment. The 3 million ton balance will be used to implement the NAFTA strategy. The German company has reached an agreement with the world’s largest iron ore supplier, CVRD (NYSE:RIO) (Rio de Janeiro, Brazil), for an increase of 19% in ore prices on the 2005 level. For related news item see May 11, 2006 – Chinese Need Iron Nerves, Steely Resolve and Cutting Edge Statistics in Ore Price Poker Game. CVRD will take a 10% stake in steelmaker CSA. CSA is a joint venture company created between ThyssenKrupp and CVRD.

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