Coils of steel stand on trains in front of the ThyssenKrupp steel mill on March 5, 2018 in Duisburg, Germany.
Germany’s Thyssenkrupp along with India’s Tata Steel signed a final agreement on Saturday to establish a long-expected steel joint venture, the European steel industry’s biggest shake-up in more than a decade.
The final agreement comes after months of negotiations since an initial agreement was announced in September. Both companies desire the idea will help them respond to challenges from the volatile steel industry, including overcapacity.
The largest deal in Europe’s steel industry since the takeover of Arcelor by Mittal in 2006, the 50-50 joint venture – to be named Thyssenkrupp Tata Steel – will have about 48,000 workers along with about 17 billion euros ($19.9 billion) in sales.
Based from the Netherlands, the idea will be the continent’s second-largest steelmaker after ArcelorMittal. the idea forms the core of Thyssenkrupp CEO Heinrich Hiesinger’s plan to turn his steel-to-submarines conglomerate into a technology company.
“The joint venture not only addresses the challenges of the European steel industry,” Hiesinger said. “the idea will be the only solution to create significant additional value of around 5 billion euros for both Thyssenkrupp along with Tata Steel due to joint synergies which cannot be realized in a stand-alone scenario.”
Tata Steel Chairman Natarajan Chandrasekaran, in a separate statement, said the joint venture will create “a strong pan- European steel company in which will be structurally robust along with competitive”.
The deal comes as European steel makers face tariffs of 25 percent on their exports to the United States, their biggest market. in which might force local market to absorb more volume as a result.
Since the tariffs were announced in late May, shares in European steelmakers ArcelorMittal, Thyssenkrupp, Salzgitter along with Voestalpine have lost 8 to 17 percent.