Steel industry: Salzgitter: “Very challenging second half of the year”

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    Steel making is just as energy-intensive as it is raw material-intensive. The strong demand, for example from car and machine builders or from the construction industry, nevertheless provided Salzgitter AG with lavish earnings.

    The increased prices for steel have recently brought in high profits for the Salzgitter Group – according to the management, however, the further course of the year could become more uncertain.

    “The markets are currently falling again, unlike commodities,” said CEO Gunnar Groebler at the general meeting on Thursday. “We are preparing to see a very challenging second half of 2022.”

    The dynamic development of raw material and energy costs could be mitigated to some extent by hedging transactions. Coal and ore deliveries for Salzgitter were hardly affected as a result of the Ukraine war. “Of course there are indirect effects such as electricity and gas prices or uncertain sales markets,” said Groebler. “These effects are noticeable, but we as a company can prepare ourselves for them.”

    Aiming for independence from Russian raw materials

    The manager emphasized that Salzgitter, as the second largest German steel manufacturer, wanted to help achieve greater independence from Russian raw materials. “One way to do this is through LNG terminals. We are already producing the pipes through which the gas will flow,” said Groebler about the connection to the reception point for liquid gas in Wilhelmshaven.

    Hopefully your own energy supply will not be endangered. “If we had to assume an abrupt end to gas supplies (from Russia), that would have an impact on Salzgitter AG.” However, it is difficult to predict the exact extent of this.

    Overall, the Group expects further growth in sales and earnings in 2022. The management estimates that the proceeds could level off at 11 billion euros. In 2021, 9.8 billion euros were achieved, the net profit ended up at 586 million euros. Shareholders should get 75 cents per share – this would be the highest payout since 2008.

    From coke to hydrogen

    Salzgitter wants to gradually convert its steel production from coking coal to hydrogen. In addition to the pig iron, water vapor is produced instead of carbon dioxide, which can significantly improve the climate balance. From the summer, a first plant is to replace a normal blast furnace. The necessary hydrogen must be obtained from water or ammonia using green electricity so that the overall CO2 reduction is successful. To this end, Salzgitter has teamed up with the Danish wind energy group Ørsted. “It is important for us to secure both forms of energy: green electricity and green hydrogen,” said Groebler.

    In addition, one wants to remain an independent company – there had been rumors several times about a possible merger with the German industry leader Thyssenkrupp. The construction and raw materials entrepreneur Günter Papenburg, whose voting rights reach the threshold of a quarter, had declared in May: “We are not aiming for any significant changes in the capital structure of Salzgitter AG.” However, one wants to “if necessary influence the appointment of other administrative, management or supervisory bodies”.