Outokumpu Faces Challenges amid Steel Industry Crisis
In the factory hall in Krefeld, North Rhine-Westphalia, large rolls of steel sheet lie in rows, each weighing around 20 tons. Here, in the largest German plant of the Finnish stainless steel company Outokumpu, they are rolled flat, machined, and cut to customer specifications. This publicly traded company from Helsinki is Europe's largest manufacturer of stainless steel, a material significantly more expensive than regular steel, yet known for its corrosion resistance and high heat and acid resistance due to special additives. Items such as cutlery and household appliances are made from stainless steel.
Since June, a German has taken the financial helm at Outokumpu: Marc Simon Schaar. The 47-year-old’s office is located in the administrative building near the cold rolling mill. A former management consultant who trained as a bank clerk and studied business administration defends the higher prices by stating that stainless steel lasts longer and requires less maintenance, leading to cost advantages. He illustrated his point by mentioning the Eiffel Tower, which was built with conventional steel. Had it been made from stainless steel, the maintenance costs saved could have financed four more Eiffel Towers.
Outokumpu has a global workforce of 8,500, with 1,700 employees in Germany, 1,000 of whom work in Krefeld. The company acquired the stainless steel division from Thyssenkrupp in 2012, which accounts for its strong presence in Germany, the most important stainless steel market in Europe. However, the steel industry is currently facing a crisis, and high energy costs combined with competition from China are making life difficult for manufacturers. At Thyssenkrupp's steel subsidiary in Duisburg, located 25 kilometers northeast of Krefeld, thousands of employees are anxiously awaiting news regarding job security.
The IG Metall union has also expressed concerns over potential cuts and layoffs at Outokumpu. Nevertheless, CFO Schaar emphasizes that redundancies are not on the table. "We are discussing with employee representatives, among other things, the possibility of making the shift system more flexible to manage capacity dips," he said. The stainless steel market is extremely cyclical, leading to sharp fluctuations in demand, currently swinging toward weakness. Additionally, Schaar has pointed out that Outokumpu’s main plant in Tornio, a city in Finnish Lapland, is one of the most efficient and sustainable in the world. When demand weakens, they aim to fully utilize those facilities.
Born in Wuppertal, CFO Marc Simon Schaar studied in the Netherlands and the USA. Like other European steel executives, Schaar laments the influx of cheap imports from China. "China is pushing its enormous overcapacities onto the world market," he explained. "We love competition, but only under the same conditions." Despite import duties and transportation costs, Chinese manufacturers can offer stainless steel in Europe several hundred euros cheaper than Outokumpu.
Schaar fears that the threat from China could grow. China's domestic demand remains weak, and the U.S. is barricading itself against steel imports. As a result, China will continue to export large quantities to other parts of the world, making life difficult for European providers.
The rising energy costs in Germany further complicate matters, according to Schaar, who notes they are more than twice as high as in their Finnish plant. "The German industry needs a different energy policy; we need sufficient carbon-free electricity at competitive prices," he stated. In Southern Lapland, the electricity for the plant comes from wind, water, and nuclear power. The company’s leadership is even considering building a small modular reactor at Tornio—essentially a mini nuclear power plant that would supply climate-friendly electricity just for the factory. Studies are ongoing, but no decision has yet been made.
However, Schaar insists that the high energy prices in Germany are not the only point of contention for the industry. "It’s also essential to reduce bureaucracy, streamline approval processes, and provide stable regulatory conditions," he emphasized. "Germany is a significant and innovative market, but right now, it’s darn difficult to justify investments there because we can’t calculate whether they will pay off in five or ten years."
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