COMPANY PRODUCT INQUIRY INFORMATION COMMUNITY NEWS Welcome to Wanjoo Metals       HOME > CUSTOMER CENTER > NEWS TITLE  The Guiding Hand Behind a Thriving Steel Maker WRITER   administrator DATE   2013-09-17 10:19:32 LINZ, Austria — From his office in a somewhat dated-looking building called the Blue Tower, Wolfgang Eder can look out over the Voestalpine steel mill complex that dominates this city. The site, which sprawls across 6.5 square kilometers (2.5 square miles), was carved out in the late 1930s to support the German arms industry in World War II. The silos of blast furnaces loom above a plain of concrete crisscrossed by railroad tracks. The complex has its own port, cut into the banks of the Danube. The operation explains Linz’s nickname — Stahlstadt, or “Steel Town.” None of it seems very high-tech, but looks can be deceiving. Mr. Eder, an affable and frank lawyer who has been the chief executive of Voestalpine since 2004, has managed to keep his company profitable by refocusing steel as more than just a commodity subject to the whims of price fluctuation. Over the last decade, Mr. Eder has guided investments of around 3 billion euros ($4 billion) to upgrade the complex with a new power unit to cut energy costs. He has added production lines where ribbons of steel are run through tubs of molten zinc to produce coils of corrosion-resistant flat steel. The metal goes to German automakers like BMW and Audi, whose factories sit just across the border to the west. Mr. Eder is trying to convince his colleagues that steel, despite its gritty image, can be a high-tech industry with high profit margins. He has aimed to move away from low-profit products like beams and reinforcement bars for the construction trade and into higher-margin materials for automakers, as well as for oil and natural gas companies, which he says are less sensitive than other customers about price. About 60 percent of Voestalpine’s 11.5 billion euros in sales for the year that ended in March were from the transportation and energy sectors. Mr. Eder’s approach has helped Voestalpine navigate the financial crisis and its aftermath comparatively unscathed. The Austrian company, the third-largest European steel maker, has remained profitable throughout the downturn, while its two bigger rivals, ArcelorMittal and ThyssenKrupp, have from time to time veered into losses. “When I look at their steel business versus their peers, it is the benchmark,” said Jeff Largey, an analyst at Macquarie in London. Voestalpine hired Mr. Eder in 1978, when it was still a state-backed conglomerate, to establish a mergers and acquisitions department. He was a central figure in the company’s initial public offering in 1995 and through the various stages of privatization over the next decade. He said his experience in helping to reorganize Voestalpine and transform it into a private enterprise taught him how “to work like a doctor in a company saying, ‘This is cancer so we have to delete it,’ or, ‘this might be something that maybe could survive.' ” Voestalpine now has about 46,000 employees. Only about 11,000 of those jobs are in the Linz steelmaking operations, less than half the number in 1985, even though production has increased. And the company continues to refine its focus. Last year it decided to close a plant in Duisburg, Germany, that made railroad tracks, and eliminate 350 jobs, saying the unit was not competitive. The closing also removed a smudge on the company’s reputation: Voestalpine was one of several businesses fined by the German Federal Cartel Office this year and last for fixing track prices. The company’s stock was hit during the downturn, but over the last year its shares have returned about 40 percent to investors in appreciation and dividends. Earnings at Voestalpine for its financial year that ended in March were up 26 percent, even though 72 percent of the company’s revenue came from Europe, where demand has been anemic. Citigroup estimates that Voestalpine will report net profit of 171 million euros for the quarter ended in June, up 18 percent from a year earlier, when it releases earnings on Wednesday. In the last decade, Mr. Eder has nearly tripled the research and development department’s budget and staff, to about 137 million euros and more than 700 people. Among several promising new products is a tough but lightweight type of steel it calls phs-ultraform, which Voestalpine has started supplying to high-end German carmakers for use in automobile frames. Peter Schwab, the head of Voestalpine’s research and development department, said he hoped that the steel would combat automakers’ growing use of aluminum, which he said was more expensive and harder to work with than steel. The company sold about 50,000 tons of the new product last year at about a euro a kilogram, nearly twice the price of ordinary steel. Company scientists are also working on steel capable of resisting the corrosive effects of the hydrogen sulfide gas that permeates some natural gas fields, and on pipe materials that can withstand the stresses of Arctic temperatures or the pressure of 3,000 meters, or about 9,800 feet, of water. Mr. Schwab said the company earned about 130 euros a ton on the 20 percent or so of its steel products that he called “highly innovative,” and about 70 euros a ton on a further 40 percent of its products that are “moderately innovative.” It made virtually no profit on the rest. “If you cannot innovate, you cannot make profits,” he said. As a midsize player, with annual steel production of about 7.5 million tons, Voestalpine can afford to focus on the top 20 percent or so of the market: mainly automotive and energy customers. Voestalpine estimates that in the last few years it has increased its share of the high-end market in Europe from single digits to 15 to 20 percent. At the same time, industry observers say that ArcelorMittal, the world’s largest steel company, with more than 10 times the production of Voestalpine, may have lost 10 percentage points of market share at the top, and now controls 40 to 45 percent of that segment. ArcelorMittal denies losing ground. “Our share of the European automotive market has actually increased over the last three years,” Ian Louden, an ArcelorMittal spokesman, wrote in an e-mail. Mr. Eder, who is also the president of the European Steel Association, or Eurofer, argues that the Continent is still swamped by overcapacity. He estimates that only 5 of the 58 blast furnaces that were operating in Europe before the financial crisis have been permanently closed, but that an additional 10 or 12 have to go before production and demand are in balance. “It is a nonsense to stick to old-fashioned, outdated steelmaking locations, where we have not seen any major modernization in the last 30 years,” he said. It is hard to see how there can be any major production cuts without the participation of ArcelorMittal. Its chief executive, Lakshmi N. Mittal, has already been criticized by European politicians for closing a handful of plants. On Thursday, Mr. Mittal told reporters that his company had done enough cost-cutting in Europe and that he expected results to improve. In May, ThyssenKrupp posted a net loss of 656 million euros for the second quarter after it took a 683 million euro charge on its Steel Americas unit, which has operations in Brazil and Alabama, and which the company has been trying to sell. Mr. Eder’s straight talk has won him fans. From an investor’s point of view, Mr. Eder “has been seen as frank and honest about what Voestalpine is good and bad at,” said Mr. Largey, the Macquarie analyst. “The goal isn’t to be big but to be profitable.” Mr. Eder says he worries about competitors, especially in Russia, Ukraine and Turkey, where he says costs are 25 to 35 percent below that of Western Europe. In an effort to reduce Voestalpine’s costs, he is investing 550 million euros in a plant near Corpus Christi, Tex., that will use inexpensive American natural gas to produce raw iron beginning in 2016. The iron will be shipped across the Atlantic and fed into the blast furnaces at Linz. That will help reduce costs by 15 percent, the company figures. After a long series of acquisitions over the past decade, only about a third of the company’s revenue came from steel making during the last year. Voestalpine is also a leader in railway switching units and superhard alloys for machine tools. Its catalog lists products as diverse as parts for aircraft landing gear and gas caps for cars. Mr. Eder says that only about 12 percent of the steel made at Linz is used in the manufacture of such components. But steel making will endure at the sprawling operation in Steel Town. “If a steel operation in Europe survives, then it is this operation,” he said. [ L I S T ] WanJoo Metals All rights reserved. TEL : +82-2-585-2581, 2571,   FAX : +82-2-585-2587, 8799 FL.2 DaedeokPlaza Bldg, 206, Geumgok-Dong, Bundang-Gu, Seongnam-Si, Gyeonggi-Do 463-480, Korea