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Capital market-relevant press releases, 2001-04-23, 02:00 AM

Remarks by Dr. Hadrys - Thyssen Krupp Steel AG Press Conference Hanover Fair April 23, 2001

Remarks by Dr. Helmut G. Hadrys Vice Chairman of the Executive Board of Thyssen Krupp Steel AG and Chairman of the Executive Board of Krupp Thyssen Stainless GmbH

Check against delivery !

Ladies and Gentlemen,

I too would like to welcome you to our press briefing in Hanover. I would like to deal in more detail with the stainless market and the performance of our business unit Stainless. This highly attractive market, which continued its growth last year, is in a process of consolidation and globalization. The founding of Avesta Polarit and the planned Usinor/Arbed/Aceralia merger are the most recent examples of the consolidation process in the stainless steel industry. There are signs of similar developments in Asia and the USA.

Krupp Thyssen Stainless, world market leader with production sites in Europe, Central America and China, is actively shaping this process. We welcome the recent mergers. They open up new options to us in the future, bearing in mind the associated product range restructuring. Our goal is to further strengthen our position worldwide. That the US region is a strategic priority at the moment is no secret.

We are operating on a market that has been trending clearly upward for some time. This was confirmed again in the year 2000 by growth rates of 8% for both stainless crude steel production and cold-rolled stainless sheet and strip. However most of this increase came in the first half of the year. For a variety of reasons, not all connected with the economic situation, the second half was characterized by weak worldwide demand. This also had a negative effect on prices.

Where do we stand today ? The situation is clearly better than the mood. The fundamentals are again pointing in the right direction in 2001, namely up ! Orders and production in the stainless-using sectors are good. Clearly, the necessary corrections to inventory levels in Europe have been largely made. Service centers and users in the major markets are again ordering stainless steel, so that our order books are now quite good. In this climate it was logical that we should try to regain lost ground in the price sector. Customers seem to be accepting this. For our most important market Europe we look to the future with positive expectations.

As regards the USA we are slightly more skeptical about the short-term demand trend and our sales opportunities. Although we do expect a recovery here too, we will not feel its positive effects until next fiscal year. In Asia demand remains high, especially in China. We believe the potential is there for further significant growth.

Overall, we view the remaining months of our current fiscal year with a healthy optimism. We expect stainless steel production to increase again slightly in 2001 to over 19 million tons. Cold-rolled production should for the first time pass the 10 million ton mark.

How did Krupp Thyssen Stainless perform in the first half of fiscal year 2000/2001?

Following an initially very weak order intake in the first quarter, the orders of the KTS group with around euro2.2 billion in total were only 3% lower than last year. The workload in our plants is secured for the next months. In Europe and Asia there are already signs of quickening demand. In the USA the market situation is unlikely to improve before the end of the second quarter 2001.

Total deliveries by the KTS group were around 6% lower than in the prior-year period. Sales were 8% higher at euro2.1 billion. Unfortunately the high price level of fiscal year 1999/2000 for stainless flat products could not be maintained as both base prices and prices for alloying elements, especially nickel, have fallen sharply.

Ladies and Gentlemen,

As mentioned earlier, our strategy is geared to sharing in the worldwide growth through targeted investments. One priority area is to invest in the new technologies of innovative near-net-shape casting - thin strip casting in Germany and thin slab casting in Italy. Both technologies will make it possible to shorten the production route from liquid steel to hot strip. They will result in quality improvements, a significant reduction in our costs and hence a further strengthening of our competitive position.

At the beginning of the year a new, highly modern bright annealing line for cold rolled stainless flat products was commissioned at our Italian subsidiary Acciai Speciali Terni - AST for short. The line is the most efficient of its kind in the world. A few months earlier a further cold rolling mill started operation at the same location. This will increase AST`s bright-annealed cold strip capacity by around 80,000 tons per year. The construction of the first thin slab caster for stainless grades in Terni is also making good progress. By 2003 hot strip capacity will increase to 1.5 million tons per year. The ongoing capacity expansion of our Italian subsidiary is a cornerstone of the globalization strategy of Krupp Thyssen Stainless for stainless flat products. This will secure feedstock supplies for our production lines - including Shanghai Krupp Stainless, currently being set up, and our planned activity in the USA.

At Krupp Thyssen Nirosta the process was further stabilized on the pre-industrial strip caster in Krefeld. We have made major progress on the way to a fully functional high-performance industrial facility. The start of commercial production for 2002/2003 is a realistic goal. The expansion of the finishing center in Krefeld is continuing. By 2003 up to seven slitters and five cut-to-length lines will be installed there. KTN will then have an optimum logistics basis for improved just-in-time customer service.

Our future investment projects in Europe will focus on measures to expand cold strip capacity. Krupp Thyssen Nirosta and Acciai Speciali Terni will each be building a new annealing and pickling line. These will ensure that both plants can participate in future market growth.

At our joint venture company Shanghai Krupp Stainless in China work on building the first phase of the stainless mill will be completed in the next few weeks. The cold rolling mill with a production capacity of 72,000 t of cold-rolled stainless strip and sheet will probably begin commercial production this fall. Our goal remains to expand Shanghai Krupp Stainless into an integrated stainless site with an optimum size of 270,000 tons cold rolling capacity per year and its own feedstock base.

In the USA we are currently considering plans to establish a strong competitive position in this attractive market by a production site. The options being discussed are the construction of our own plant or collaboration with an American partner. The new site would then ensure supplies to the entire NAFTA region together with our subsidiary Mexinox.

Ladies and Gentlemen,

These investments represent the way forward in strengthening and further expanding our position as world market leader for stainless steel.

That concludes our introduction. We will now be pleased to answer your questions.

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