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Company News, 2005-06-09, 07:04 AM

ThyssenKrupp to expand presence in China

ThyssenKrupp aims to expand its presence in China. "We intend to develop our activities in China, we are looking into further projects and conducting intensive discussions with a number of Chinese partners," said Professor Dr. Ekkehard D. Schulz, Executive Board Chairman of ThyssenKrupp AG, in Beijing ahead of the establishment of the new national holding company ThyssenKrupp (China) Ltd. The approval of the authorities is expected shortly. The chief task of the new holding company is to coordinate the Group's wide-ranging activities in the People's Republic and provide advisory services for subsidiaries active in the country. In addition, it will establish and develop contacts between high-ranking representatives of the Group and decision-makers in government, administration and industry. The company is registered in Beijing.

<u>ThyssenKrupp in China</u>

"Owing to its growth perspectives, the Asia/Pacific region is becoming increasingly important for the Group," said Schulz. In the past fiscal year 2003/2004 ThyssenKrupp generated sales of some 3.5 billion euros in the region - 13.6 percent of the Group's total foreign sales of 25.8 billion euros. ThyssenKrupp's presence in the region is to be systematically expanded through targeted strategic acquisitions and joint ventures. China is the Group's most important location in Asia. The Group and its two predecessor enterprises Thyssen and Krupp have been active in China for over 140 years. Today ThyssenKrupp has a total of 30 companies in China, with 3,700 employees generating sales of around 1.1 billion euros.

<u>Local activities of the Group's segments</u>

All five of the Group's segments (Steel, Automotive, Elevator, Technologies und Services) are represented in China today.

<u>ThyssenKrupp Steel</u> is systematically expanding its presence in this growth market year by year. The Carbon Steel business unit focuses mainly on high value-added products for the automotive industry. TAGAL, which started production in December 2003, is a new hot-dip galvanizing line in Dalian built under a joint venture between ThyssenKrupp Stahl and ANSC Angang New Steel Co. The line has an annual capacity of 400,000 metric tons, the majority of which is intended for the automotive and construction sectors as well as manufacturers of domestic appliances. Tailored blanks, which are laser-welded from sheets and used to produce auto body parts, are manufactured at the Wuhan location. A further joint venture for tailored blanks is being set up at the Changchun location in northern China. The Group's partners here are ANSC Angang New Steel Co. and Zhong-Ren Rui Zong Auto Component Industry Ltd. In addition, further tailored blank operations and steel service centers are to be established in China's key automotive centers in the coming years. The aim is to supply high-value carbon steel products to the production locations of international auto manufacturers throughout the country.

The Stainless Steel business unit also has successful activities in China which it is expanding step by step. One milestone was the start-up of Shanghai Krupp Stainless (SKS), a joint venture between ThyssenKrupp Stainless and the Baosteel group, in November 2001. This plant - the Group's biggest foreign investment to date with a total investment volume of 1.4 billion US dollars, produced around 90,000 metric tons of stainless steel in fiscal year 2003/2004. In the course of 2005 two further cold-rolling stands and a cold strip annealing and pickling line will be completed, boosting annual cold rolling capacity to 290,000 metric tons. The Group will thus reinforce its leading position in the fastest growing market for stainless flat products. At the same time, sales activities are being strengthened with the establishment of service centers and sales offices. Another important step will be the construction of a stainless distribution center in Guangzhou. It will start operation in the second half of the year and serve as a platform for supplies to southern China and Southeast Asia.

The Chinese auto market is likewise recording above-average growth. As a supplier of components, modules and systems for body, chassis and powertrain applications, <u>ThyssenKrupp Automotive</u> has been positioning itself to participate in this growth for many years. In 2000, China produced around 2.1 million vehicles. This year, output will be in excess of 5.2 million. By the year 2008, annual Chinese auto production is expected to rise to 7 million vehicles. The Automotive segment now has five joint venture companies producing steering systems, body and chassis parts, crankshafts and springs.

ThyssenKrupp Presta, a subsidiary of ThyssenKrupp Automotive, has two joint ventures in Shanghai and Changchun supplying around 1.4 million steering columns a year to major national and international auto manufacturers in China. ThyssenKrupp Zhong-Ren Chassis Co., Ltd. is a joint venture established in Wuhan in 2004 to produce body and chassis parts. Key customers include Changan Ford and Dongfeng Peugeot Citroen Automotive. There are plans to expand capacity to 2 million body and chassis parts by 2006.

A further joint venture in Liaoyang has been producing springs and stabilizers for local auto manufacturers since 1997. In 2004, ThyssenKrupp Automotive's latest joint venture commenced production of forged car crankshafts in Huizhou. At the end of April 2005, the foundation stone was laid for a new plant in Dalian which, in the first phase, will produce 1.5 million assembled camshafts per year.

Some 300,000 new elevator systems are installed worldwide each year, 60,000 of them in China. That makes China Asia's and the world's biggest market for new installations. Since the early 1990s, <u>ThyssenKrupp Elevator</u> has made huge strides in China and steadily increased its share of this market. In addition to production sites in Zhongshan and Shanghai, regional centers have been set up in Beijing, Chongping, Guangzhou, Shanghai, Shenzhen, Xian and Nanjing.

In early 2003 ThyssenKrupp Elevator opened its Asia headquarters in Shanghai, from where the segment's activities throughout the region are controlled. Shanghai is also the site of the newest International Technical Services Center, inaugurated in July 2004. In addition to providing testing and repair services, the center features a state-of-the-art laboratory where engineers from all over Asia are trained to service a wide range of elevators. Together with the international technical service centers in Dallas, USA and the United Kingdom, the center in Shanghai forms part of ThyssenKrupp Elevator's global testing and service network.

In the future, ThyssenKrupp Elevator will continue to take every opportunity to strengthen its presence in China, and expects annual sales to grow at double-digit rates. The segment is currently working on several major projects, such as the supply of 100 elevators and escalators for two large building complexes in Guangdong Province and 133 passenger escalators for the Shanghai subway. ThyssenKrupp Elevator is also supplying 41 elevators to the Shanghai World Financial Center. On completion, the 101-story building will be the tallest in the world at 492 meters.

Systems, facilities, specialized machinery and components together with associated services are increasingly being offered on the growing Chinese market. At present, <u>ThyssenKrupp Technologies</u> has two production sites and several sales bases in China. Shanghai Fadal Machine Tool Company started production of vertical machining centers for the aerospace and automotive sectors in 1998. With some 900 employees, the Xuzhou Rothe Erde Slewing Bearing Company joint venture has the largest workforce of any ThyssenKrupp company in China. It produces and distributes large-diameter bearings for the construction machinery sector and other areas of industry. The company holds a leading position in the Chinese market.

The segment also has a long tradition of plant construction activities in China. ThyssenKrupp subsidiary Uhde, a global supplier of chemical and industrial plants, recently won an order to design a polyethylene plant (HDPE) in Jilin for the PetroChina Company. Start of production is scheduled for late 2005. In 2004, Uhde strengthened its presence in China by establishing a local company in Shanghai. Further companies in the segment are planning to move into the Chinese market or expand their activities there. These will include equipment for the cement and minerals industries, crawler components for excavators and bulldozers as well as tire manufacturing facilities.

ThyssenKrupp Technologies' best-known project in China is the Transrapid line in Shanghai, which went into service at the end of December 2003. Traveling at 430 km/h, the Transrapid maglev train in Shanghai is the world's fastest commercial rail system. It covers the 30 kilometer trip in under eight minutes. Over three million passengers have already enjoyed the benefits of the Transrapid's outstanding comfort and safety features. Hopes are high that the existing airport link will be extended to the site of EXPO 2010 and then a further 180 kilometers to the city of Hangzhou.

<u>ThyssenKrupp Services'</u> business in China includes the supply of materials to and the procurement of materials from the country as well as local services. Services has a tradition of supplying materials and components to the Chinese market, including steel products, specialty steels and technical components as well as complete plants and equipment for the steel and steel processing industry.

China has also developed into an important supplier of raw materials to ThyssenKrupp such as ferroalloys, titanium sponge, minerals and rolled steel. European customers appreciate the reliability, quality and delivery performance of the Chinese suppliers, and ThyssenKrupp Services is looking to expand this business.

The segment also provides industrial services in China. ThyssenKrupp subsidiary Shanghai Peiniger Corrosion Protection Engineering Co. performs extensive corrosion-protection services for major plants, ship and tank coatings, concrete repair and industrial floor coatings.

Another ThyssenKrupp Services company organizes coke supplies to Europe and provides the necessary logistics. In April 2004, the segment acquired a 25 percent stake in a new coking plant in Tangshan. Through this shareholding, ThyssenKrupp Services is guaranteed a significant volume of coke together with export licenses which will secure a long-term source of supply. This year ThyssenKrupp Services plans to enter the Chinese market as a stock-holding materials distributor (steel products, plastics and nonferrous semis), serving customers from industry and building construction in the greater Shanghai area with a range of high-quality products.

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