STE E L TEC HNOLOGY I N NOVATIO N L IF E

stilT H E S A L Z G I T T E R A G M A G A Z I N E

I N T E R N A T I O N A L

Steel and Technology

Salzgitter AG: a company based in Germany

www.salzgitter-ag.de

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We Salzgitter

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PEOPLE 2We are Salzgitter

SALZGIT TER 6Chairman of the Executive Board Dr. Wolfgang Leese: “Our objective is continous improvement”

NEWS REPORT 10

Petrol heads: stil accompanied two Germans who source coveted automobiles of yesteryear and ship them to Europe

HSD steels for the automobile manufactur-ing of the future

TuBES 18 Strong demand for Mannesmann tubes across the globe: current projects in Europe and the Near East

SALZGIT TER 22

Executive Board member Finance Dr. Heinz Jörg Fuhrmann: “We couldn't wait for Prince Charming”

TECHNOLOGy 2�Growth and diversification in technology: Salzgitter AG has now increased its stake to 86 percent of capital stock

STEEL 28Salzgitter Steel Strategy 2012: On the offensive with high-quality products. Wide-ranging investment program in steel

SALZGIT TER 30New large-scale equipment for research. All-new forming press, test rolling mill, hot dip galvanizing simulator and an annealing simulator

GO: The Salzgitter AG GenerationInspiring the next generation with a love of technology: Salzgitter AG addresses school pupils and students

TRADING 3�“Demand in India is set to increase” Interview with Executive Board member Heinz Groschke

The market in Asia: From importer to exporter. How the steel market in China has changed in the course of a few years

A visit to Houston: Salzgitter Mannesmann International uSA. The Texan metropolis has become the center from which the Group serves the American market

PEOPLE �2 We are Salzgitter

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Salzgitter AG – Steel and Technology – has been active as a stock market listed company for 10 years. In the course of this time, the overriding corporate goal has remained unchanged: maintaining entrepreneurial independence through profit-ability and growth.

The Group has undergone some remarkable developments in the process. Following the major growth step in the year

2000 with the acquisition of Mannesmannröhren-Werke, as well as portfolio additions in the divi-sional areas of steel, trading and tubes, Salzgitter has advanced to a new dimension in the mean-time. Since 2001, the share has been listed on the MDAX and has impressed with its far above-aver-age performance, also in competitive comparisons.

And we continue to write new chapters in the “Made in Salzgitter” success story: In 2007, we acquired Klöckner-Werke AG, a manufacturer of special machinery, filling and packaging systems. These activities now form the core of the new Technology Division.

In order to increase our competitive strength and secure our key locations, the Group will be committing an investment volume of 1.7 billion euros over the next years to equipment, plants and processes. The topics featured this time in stil revolve around the present and future of the Salzgitter Group, as well as the people who work here. These topics are not only presented as facts, figures and interviews, but also through entertain-ing reports from all corners of the globe.

Two double-page spreads at the front and back of the magazine are dedicated to how our em-ployees see themselves and their colleagues. These, in the best sense of the word, nonprofessional snapshots emphasize our people’s strong connec-tion and identification with our company.

Incidentally, the title stil – the letters stand for “Steel”, “Technology”, “Innovation” and “Life” – is a German play on words. stil is pronounced like the English word “steel”, but its meaning also implies “style”, in the sense of good taste, aesthetics and cosmopolitan flair.

We hope you enjoy reading our magazine!

Published by: Salzgitter AG, Eisenhüttenstr. 99, 38239 Salzgitter, telephone: 00�9 (0)�3�1 / 21- 01, www.salzgitter-ag.de. Overall responsibility: Bernd Gersdorff (Corporate Communications). Coordination: Olaf Reinecke. Magazine orders: Michaela Kruffke, kruffke.m@salzgitter-ag.de. Realization: Schau verlag GmbH, Grüner Deich 1, 20097 Hamburg, telephone: 00�9 (0)�0 / 32 87 27 - 0, info.stil@schauverlag.de. Editor-in-chief: Carsten Wurr. Layout: Katharina Osterwald. Printed by: Ruth Printmedien GmbH, 3811� Braunschweig. Translations: Baker & Harrison, Munich

stil

Welcome!

Dr. Wolfgang Leese, Chairman of the Executive Board of Salzgitter AG

Petrol Heads Tracking down vintage

cars in the uSA

Bernd Gersdorff,Head of Corporate Communications

TradingA visit to Houston

SteelCoiled for customers: Coils at the Salzgitter Logistics Center

in this issue in this issue

The magazine compared 500 of Europe’s top companies – and Salzgitter came out ahead of the pack: Number one in the raw

materials segment and second for investor friendliness and portfolio recommenda-tion. Based on a Europe-wide analysis of 500 quoted companies in all industries, “Manager Magazin” awarded top marks to the Salzgitter Group.

The magazine survey (issue 11/2007)

looks at the information in the reports filed by these 500 companies over the past three years. Carried out as a regular event, the object of the analysis is to identify those companies that generate higher re-turns than those generally expected by stock and bond market investors.stil international talked to dr. wolfgang leese who chairs the Executive Board of Salzgitter AG about this tribute, as well as addressing the strategies needed to remain successful and major Group acquisitions.

stil “Manager Magazin” has accorded Salzgitter AG an extremely positive rating in its Europe-wide survey. What value do you place on this acknowledgement?dr. wolfgang leese The assessment crite-ria are well known. I am delighted that the Group’s performance has proven so strong in comparison with Europe’s top 500 companies.stil What are the causes underlying the

Group’s good performance?leese The causes lie in a bundle of measures that have been initiated in recent years. The first of these were the successful optimization of pro-cesses, the change in leadership cul-

ture with the introduction of target-based management and the active control of our Group portfolio. And we are continuing the process by positioning ourselves as a niche supplier in the various product market segments we serve. Contrary to the traditionally advocated approach of keeping a tight focus, we rely on a broadly distributed product portfolio.stil Even long-standing steel industry ex-perts have never known a steel boom con-tinue for so long. What reasons do you see for this?leese The main causes are the dynamic rates of growth in the economies of the BRIC states (Brazil, India and China) which have created an enormous demand for steel for various applications.stil How long do you expect this develop-ment to last?leese As has been said many times, I can see this trend continuing for some time yet. On the other hand, one should not lose sight of the prospect of over-capacity.stil Is the success of Salzgitter due only to the economic situation?leese The fact that our position is due to more than the economy alone is clearly evident from a comparison between our

“Our objective is continuous improvement”The Salzgitter Group is in top form, says “Manager Magazin”

The Salzgitter Group Executive BoardThe six members of the Salzgitter Group Executive Board:

(front, from left) Peter-Jürgen Schneider, Personnel & Services; Dr. Wolfgang Leese, Chairman of the Executive Board; Dr. Heinz Jörg Fuhrmann, Finance & Technology; (back, from left) Wolfgang Eging, Tubes;

Heinz Groschke, Trading; Hans Fischer, Steel

Annual interview with Dr. Wolfgang Leese, Chairman of the Executive Board of Salzgitter AG

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performance and that of our competitors whose figures are significantly less impres-sive. The reasons for this lies in the meas-ures I have already referred to as well as the profitability improvement programs that have contributed several hundreds of mil-lions of euros to our bottom line. Manage-ment and a combination of managers and employees with good ideas, suggestions for improvement and personal commitment have also played a substantial part.stil Salzgitter has taken some important steps on the path to growth with the acqui-sition of precision tubes manufacturer Val-lourec Précision Étirage and a stake of around 86 percent in plant and equipment manufacturer Klöckner-Werke. What were the intentions behind this?leese Besides the significant world market

positions in different product segments that these acquisitions have brought us, we are creating added value for our share-holders.stil Klöckner-Werke operates in an industry in which Salzgitter AG has not previously been involved. What were the objectives for this commitment?leese Klöckner-Werke AG forms the nu-cleus of our new Technology Division which offers the prospect of continuous growth that will in turn have a stabilizing effect on the Group. stil Will there be any further growth of this kind, maybe at the new Technology Divi-sion?leese Certain rounding-off acquisitions and expansions are currently under con-sideration at this division.

stil You took up your present post in the year 2000 with the motto of “independence through profitability and growth”. How se-cure is the Group’s business independence?leese In the light of our success in recent years, the firm position of the State gov-ernment and the comments made by Minister President Christian Wulff, our other stable shareholders and the buy-back of ten percent of our shares, I am less concerned about our independence.stil The process of concentration in the steel industry continues unabated. Salzgitter re-gards itself as a niche player. What opportu-nities and risks does this position hold?leese The continuing concentration proc-ess being played out among the dominant players in the steel industry offers some outstanding opportunities for us as a niche player. It is our high-quality prod-ucts, our flexibility, our close ties to our customers and our reliability that set us apart.stil Where do your see Salzgitter AG in three years’ time?leese We are quite clear on that: We intend to continuously increase sales to between 13 and 15 billion euros. And over the cycle we are targeting an ROCE (return on cap-ital employed) of on average 15 percent. In addition to that, we also want to en-hance our already positive image.stil Since you have been Chairman of the Executive Board, one of your main concerns has been to increase the willingness at all levels of hierarchy to embrace change. Are we fully up to speed by now?leese We’re moving, but future competi-tion will make further demands on us with the result that we must become pro-gressively faster and fitter.

SteelExternal sales: 3,��7 billion

Salzgitter Group External sales cons.: 10,1� billion Employees: 24 000

TubesExternal sales: 2,�04 billion

TradingExternal sales: 5,021 billion

ServicesExternal sales: 1,1�� billion

TechnologyExternal sales: 0,5�� billion

Steel and the climateSteel is part of the solution, not the problem. New materials for the automotive sector

A keen eye on the future: Dr. Wolfgang Leese working out at the Group’s own gym

Words like natural resources and energy efficiency are on everyone’s lips nowadays. Hardly a day

passes without climate change featuring in news broadcasts, talk shows and docu-mentaries. Only the emphasis varies, from cutting emission budgets in the context of CO2 certificate trading, to missed trends in the automotive industry or attempts to ban light bulbs.

The steel industry finds itself squarely in-volved in this irreversible process of discus-sion and development. On the one hand, there is the question of the CO2 released by our production processes. On the other hand, however, it is also essential to consider the contribution that the use of our steels can make towards increasing our customers’ energy efficiency.

Input materials such as ore and scrap, re-duction agents and energy account for up to three quarters of the cash cost of steel produc-tion in Germany. For this reason alone, there is of necessity a sustained econom-ic pressure at all levels of our undertaking to conserve resources wherever possible in the production of steel. For example, iron effi-

ciency has been increased to �0 percent to date. Similarly, the reduction of around 40 percent since 1��0 in our specific primary en-ergy consumption per ton of crude steel dem-onstrates the successful efforts we have made.

But does this mean that, given the success-es already achieved, the steel industry feels no further obligation to increase the resource and energy efficiency of its own production proc-esses? Indeed not, for at Salzgitter the issue of efficiency is also an indicator of innovation. Our continuing achievements in the develop-ment of new materials for the automotive sec-tor are a prime example. With the produc-tion here in Salzgitter of high- and ultra-high-strength steels for automotive applications we are already making a significant contribution towards protecting the climate. It has been shown that the development and use of these steels compensates for a good 15 percent of the process-dependent non-reducible emis-sions during manufacture. This is a great op-portunity for steel products to prove them-selves in the climate debate. Developments in the field of final-size casting offer the prospect of new steel grades for the automobile indus-try that will allow even greater scope for light-weight autobody designs. It is becoming very

clear that in the debate on climate change, steel as a material is less a part of the problem than a future-oriented element in the endeav-ors by the economy as a whole to increase re-source and energy efficiency.

In future the companies that lead the field will be those that make most effective use of their employees’ skills and knowledge, not least in matters of resource-efficiency. An analysis of our profitability improvement program, as well as our employee sugges-tion scheme shows that almost a third of the achievements made concern the consump-tion of energy and resources. Climate change can only be overcome through the knowl-edge-based networking of processes and products. Hysteria and scaremongering will most certainly not resolve the problem. How-ever, one-dimensional approaches such as curtailing highly efficient production as a re-sult of emissions trading are equally unlike-ly to bring us any closer to the desired result. Making the most of the available opportuni-ties on a global scale is dependent on deploy-ing technically intelligent solutions as a help-ing hand to enable the developing economies to use resources and energy efficiently in their pursuit of growth.

The History of the Salzgitter Group

1923Foundation

Klöckner Werke AG

1858Foundation

Ilseder Hütte

1970Stahlwerke

Peine-Salzgitter AG

1979Acquisition

Holstein und Kappert

1994Divestiture of the steel

production

since 1946Production of heavy plate

2007Acquisition KWAG

1989Preussag Stahl AG

1937Foundation

“Reichswerke”

1945Salzgitter

Hüttenwerk AG

1992/95Privatization

and Integration

1597Foundation

Ilsenburger Kupferhammer

1945Nationalization

2000Acquisition MRW

1890Foundation

Mannesmannröhren-Werke AG (MRW)

1970Cooperation

Thyssen (steel) /Mannesmann (tubes)

2000Takeover by Vodafone

1998Salzgitter AG

Steel and Technology

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news report

The more sensible and economical new cars become, the more some folk yearn for the classic automobiles of yesteryear. stil accompanied two Germans who source

these coveted classics in the USA and ship them over the pond

Petrol heads

A Mustang among mustangs: Jens Wolfram and Stefan Meyer found this coupé on a farm near San Diego. A little long in the tooth, but

sound in wind and limb. A good catch

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February in Los Angeles. A rainy Tuesday, to be precise. oldie-hunters jens Wolfram and Stefan Meyer are on their way to a specialist dealer when they find them-selves next to a cool blonde in a beige Mustang convert-ible. The two guys from hamburg exchange a quick

glance and nod: “We gotta have it.”Now it’s time to move fast. Signal, change lanes, catch the green

light – and don’t let the roaring ’67 beauty out of your sight. Fi-nally the lady stops at a gas station. Putting on a casual air jens Wolfram strolls over to the driver. he sets the scene, “Wow, you sure have one powerful automobile!”, then gets right to the point: “I’ll buy it off you! Is 17,000 dollars okay?”

Try making small talk like that at a German gas station – and hold on to your hat. but people in the USA are more laid back. The cool blonde takes only a moment to recover. She hadn’t in-tended to sell the car. but all that money? right now? jens Wolf-ram explains, “Americans are more flexible about these things.” The lady fetches the title – the registration document – and 60 minutes later the deal is done. At a Texaco station in orange County. For cash.

A lot of the business that jens Wolfram and Stefan Meyer do in the USA follows a similar pattern. just over a year ago the two

40 year-olds from hamburg set up Westsidecars. They buy clas-sic cars in the USA, whip them into shape, sort out the paperwork and ship them to Germany – a package deal to whet the appetite. You’d prefer to hunt up your own automobile? No problem: For € 1,000 euros a week you can tag along.

both Wolfram and Meyer made their first careers in marketing. Top jobs beckoned, offering plenty of dough but also enough stress to invite an early grave, as well as “job practices that just weren’t fun any more,” as jens Wolfram puts it. When his boss pulled the rug from under a trip to the USA on which he had planned to buy the classic car he yearned for, he chucked it in and went anyway. on that occasion back in january 2006 he didn’t find the Mustang he wanted for himself, but he did find cars for eight friends who had heard of his trip and gave him the money to go shopping. “I realized then just how big a demand there is in Germany for good vintage cars,” jens explains. Meanwhile, West-sidecars’ client list includes even the directors of some of Germa-ny’s major companies.

back to California. The evening after their gas station deal finds the two guys sitting exhausted in a motel room in huntington beach. Stefan Meyer has taken the Mustang to a shop they use regularly where the car will be brought up to scratch for the Ger-

man customer. They’ve been traveling for a good three weeks, with better than 3,000 miles under their belts. of the 150 or so cars they’ve viewed, they have bought 18. They are by no means dissatisfied with the score to date. They have nowhere near filled all their orders, but they have just one week left.

Wolfram and Meyer are perfectionists. The two bachelors are choosy about what they buy, even though the condition of older vehicles in California is generally far better than back home. “one reason is the climate,” says Stefan Meyer. “Away from the coast it is so dry that the worst the body panels suffer from is a little surface rust. The engines too are mostly in good condition for their age and mileage, because Americans hardly ever drive at full throttle.”

Two suits that can judge the condition of a car? jens Wolfram laughs, “We’ve always had a weakness for cars. Add to that the ex-perience gained over the past year and a few helpful measuring instruments. And if we are still in doubt, there is always our me-chanic in hamburg who we can contact online at any time.” but that’s not all: Since 1963 to 1977 Porsches are among the classics most in demand and the two guys have been on a special crash course in Zuffenhausen.

So what else do customers order? Stefan Meyer: “1965 to 1968 Mustangs are popular, as are Corvettes from 1962 to 1973. A top seller recently has been the Mercedes 560 SL built between 1986 and 1989, which was never available in this version in Germany. And lately there has been a demand for the bMW Coupé 3.0 up to 1975.” but what about the cost? jens Wolfram: “You can buy a Mustang convertible from us in tiptop condition with all paper-work for upwards of 30,000 euros, delivered to your door.” Not exactly chickenfeed, but a lot cheaper than from a normal dealer.

The oldie-hunters find their prospective purchases on the In-ternet and in magazines. They also receive a lot of tips from a net-work of sources they have meanwhile built up. “We often spot in-teresting vehicles in people’s front yards as we’re driving by,” says jens Wolfram. “Many Americans tend to collect automobiles. When they buy a new car, they don’t sell the old one, it just gets parked up somewhere.”

Next day, next appointment. From a distance the Mustang looks well preserved. but a look underneath soon shatters the il-lusion. Where did the floor go? What used to be metal is now a huge hole. The next prospect has a similar problem. A classic

“THE CLIMATE, THIS LIGHT – AND ON TOP OF THAT THE FANTASTIC LANDSCAPE: CALIFORNIA IS A DREAM, NOT JUST BECAUSE OF THE CARS”

Exotic sets of wheels at a car dealer’s lot in San Diego

Hot: A hot rod, with saleswoman

A complete kitchen on wheels

The paintwork is picture perfect – typical of vintage cars in California

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Mb 560 SL, good looking and low mileage. “rotten,” Stefan grunts from under the car, “Another one rusted right through.” It’s dark already by the time they get to the highlight of the day. Their flashlight beam picks out first a stack of lumber, then a blue plastic sheet. Isn’t that a cup rim? Could be a Porsche under there. “do you mind?” they ask the seller as they shift the lumber, pull back the sheet and – wow! A 1973 Porsche 911 T. A bit tatty round the edges, with a lot of parts strewn inside. but no rust at all on the body, and the engine sounds good. Now it’s down to the price, they haggle – and shake hands.

11.00 p.m. in another motel. Thinking about the Porsche un-der the woodpile, Stefan Meyer suddenly shivers. “do you realize,

the wheel housings were full of black spiders? It’s lucky I had gloves on, but if one of those things had bitten me…!“

The final day. jens Wolfram and Stefan Meyer stop off in Long beach before catching the flight home. That’s where the vehicles they have bought are loaded into containers and shipped back to Germany. jens Wolfram lovingly runs his hand over a fender, checks the new soft top on the red Mustang in the far corner and casts one last glance over the paperwork.

jens and Stefan love their automobiles – which is why they spread cat litter in every vehicle. It’s guaranteed to soak up the moisture during the six-week sea voyage. “You wouldn’t want mold on the roof lining, now would you?”

An Austin Healey 3000, vintage 1962

Dream Porsche at adealer in L.A.

In mint condition:A Chevrolet Special Deluxe from the 1940’s – spotted on a street in San Diego

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Steel makes cars lighter and more economicalFrom material design to components

There are many facets to the re-lationship between steel and the car. From the earliest days when automobiles were little

more than motorized carriages, steel has been the key to stability.

This symbiosis between steel as the material and the car as the end product has survived one technological develop-ment after another, despite the fact that our expectations of the car have risen steadily over the decades. Progress has been consistently driven by demands for comfort, safety, economy of manu-facture, availability of resources and of course ecological considerations.

In the meantime, a contest has devel-oped between materials, in which the variety and versatility of steel play to its advantage.

There are four aspects in particular which stand out. Steel offers:

an attractive price-performance ratiogreater rigidity than comparable ma-terialsexcellent formability, which in combi-nation with rigidity means that steel can deliver substantial reductions in weightsteel can be cost efficiently recycled

on the other hand, it is no longer enough just to make and supply steel: When developing new qualities of steel, the manufacture and, to an increasing extent, the processing to be carried out by the customer must also be consid-ered at an early stage, in order to fulfill market requirements for high-quality steel products and successfully conform with the product lifecycle envisaged by the customer. Following a long-estab-lished practice in the automobile indus-try, steel makers are increasingly turn-ing to “steel prototypes” and “virtu-al materials” in order to minimize the cost-intensive field trials inherent in the material design process. A fundamental understanding of both the produc-tion and operation of steel com-ponents is essential in order to use all of the properties of steel to the fullest benefit of process-ing users as well as end consum-ers. Component trials conducted jointly with customers at an early stage deliver maximum informa-tion and know-how gains needed to exploit the potentials of new and modified grades of steel.

Customer support extends from ini-

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tial consultations on the development of new components with particular char-acteristics, via the creation and testing of prototypes, and all the way through to the approval of the material and/or component for mass production.

Today, the steel industry plays a deci-sive role in the design and construction of lighter-weight motor vehicles.

In this field, the ScaLight project – a cooperative undertaking by Salzgit-ter AG and Wilhelm Karmann Gmbh – is both an expression of this advanced thinking and a platform on which to present new ideas, material qualities and production technologies and realize these in steel.

ScaLight – the Scalable Autobody Lightweight Concept – can be used by automobile manufacturers to build a variety of body styles such as soft-tops, roadsters and sport utility convertibles.

This method combines a series of benefits and options: The vehicles are lighter and therefore consume less fuel, which is an important consideration, especially against the backdrop of cur-rent discussions on climate change. What’s more, they can also be produced more cost efficiently.

The importance of this economic as-pect was underscored by dr. André Kröff, project manager at Salzgitter AG: “We have developed a complete pro-duction plan, including a business case and cost model, which extends from

the choice of materials for individual components through to the production plant itself.”

This proves that lightweight construc-tion need not be expensive, and that to-morrow’s requirements can already be met with high-strength steels today.

In partnership with Corus, Salzgit-ter has also been developing what are termed hSd steels. hSd stands for high Strength and ductility. “These new steels exhibit very high strength, while also offering excellent formabil-ity,” explained Prof. dr. Matthias Nie-meyer, Managing director of Salzgit-ter Mannesmann Forschung. “In addi-tion they are also five percent less dense than steels in use today, which helps to save weight and opens up potentials for lightweight designs.”

Scalable autobody ar-chitecture – exemplified by an open-top SUV

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Built-up prototype demonstrating scalable architecture

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gas springs

cam shafts

balancer shafts,turned parts

power steering cylinders

ball cages

cardan shafts

hydroformed components

Hydroforming

stabilizer bars

shock absorber cylinders

drive shaftsMonobloc and 3-piece

airbags Passenger / side airbags

ultra high-pressure diesel injection lines

Common rail system

Precision steel tubes in the automobile industry Precision tubes are absolutely essential in modern automobile manufacturing. Salzgitter has strengthened its position in this segment in a targeted manner

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Baltic Sea Pipeline contract signedThe order calls for 860,000 tons of large-diameter pipes to be produced in Mülheim. Capacity utilization is assured

Largest individual order in the history of EUROPIPE

Nord Stream AG and EURO-PIPE GmbH have signed a contract for the supply for steel pipes to construct the

Baltic Sea Pipeline. EUROPIPE will pro-vide around 75 percent of the pipes for the first leg of the 1,200 kilometer pipe-line from Vyborg in Russia to Lubmin near Greifswald in Germany. The order for the other 25 percent went to Russian pipe producer OMK.

EUROPIPE’s share of the deal amounts to 860,000 tons of high-quality steel pipe, representing an investment in excess of a billion euros by Nord Stream AG, the international joint venture set up to design, build and subsequently op-erate the Baltic Sea Pipeline.

The contract is itself an important step towards completion of the first section of the line slated for 2010. By the time construction work begins in 2009, roughly a third of the pipe – 400 kilo-

meters – must be in store at various lo-gistical depots, ready to be laid. Which means that by then the entire production chain must be completed, from steel-making, plate rolling, tube manufactur-ing and coating through to transporta-tion to the storage sites.

The 860,000 tons of large-diameter pipe booked by EUROPIPE represent the largest single order in the company’s his-tory.

EUROPIPE will manufacture the en-tire order at its Mülheim works. The plate required to produce the pipes will be ordered by EUROPIPE from its share-holders Dillinger Hütte and Salzgitter. For Salzgitter’s part, the input material

will be supplied from the plate mill at Mannesmannröhren Mülheim GmbH. This order alone represents capacity uti-lization in excess of 40 percent over 18 months at EUROPIPE. The internal coat-ing and external corrosion-proofing in-cluded in the order will be carried out by EUROPIPE’s subsidiary MÜLHEIM PIPECOATINGS (MPC) GmbH, which in turn will benefit from as much as 60 percent capacity utilization.

The total cost of the Baltic Sea Pipeline will be in the order of six billion euros. That’s around 15 percent less than for an overland pipeline – including the operat-ing costs for a 25-year period. This is due mainly to the comparatively high operat-ing costs for a land-based pipeline and the associated compressor stations. The

pipeline will connect Russia and the Eu-ropean Union via the Baltic. EU demand for imports of natural gas is expected to reach 536 billion cubic meters by 2015 – compared with 336 billion in 2005. The Baltic Sea Gas Pipeline will be able to fulfill around 25 percent of the addition-al demand.

With contracts safely signed, from left: Henning Kothe and Matthias Warnig, both of Nord Stream, and Dr. Michael Gräf and Lauri Malkki, both of EUROPIPE

“Securing and extending our leading position worldwide”The Tubes Division of Salzgitter AG has undergone some changes: We talked with Tubes Director Wolfgang Eging about growth strategies and concentration on welded tubes.

stil In business terms, the Tubes Division of Salzgitter AG is in outstandingly good shape. How much of this is due to the strate­gic decision to focus on welded steel tubes?wolfgang eging The Tubes Division has now been highly profitable for 4 years in succession. In the 20 years before that, there was never a comparable period in which we were so successful. Following the takeover of Tubes by Salzgitter AG in the year 2000, there was very soon a ques-tion mark over the industrial leverage that came with our interest in Vallourec

as a manufacturer of seamless tubes. We had only limited scope to exercise any in-fluence over the listed Vallourec Group, and as the Tubes Division evolved, we felt it made sense to separate ourselves from V&M and our stake in VLR. With this in mind it was logical to focus on weld-ed tubes, at the premium end of the mar-ket. We aim to achieve growth by offer-ing sophisticated solutions in order to se-cure and extend our leading position worldwide. The resources released from the seamless side of the business are being

used proactively.stil The tubes business is becoming in­creasingly international – not just in the field of large­diameter pipes. What chal­lenges do you see facing precision tubes?eging As a result of our concentration on the premium segment, based on our activ-ities and our growth strategy we see our-selves very well placed to come out on top. That is particularly due to the acceptance that our products enjoy in the marketplace and their popularity among our precision tubes customers in Europe.

Interview with Wolfgang Eging, Director of Tubes stil What role does the acquisition of manu­facturers in France and the new company in Mexico have to play?eging By acquiring VPE and the plant in Zeithain producing input stock, we have laid the foundation on which to become Europe’s market leader. We intend to devel-op this position and use it to offer sophis-ticated solutions for our customers in the automotive and other industrial sectors.

The acquisition in Mexico provides a nucleus for development outside of Eu-rope. In future, we aim to secure a strong position for our automotive business in the NAFTA territories.stil The high prices for oil and gas are add­ing impetus to pipeline projects the world over. On the other hand, steel and tubes production is very energy­intensive. At what point will this development become critical?eging Let’s think back to the 80’s and 90’s when an oil price of 30 US dollars a bar-rel was judged to be the balance point be-tween exploration and the risk of under-

mining the development in gross national product.

As we now know, this bound-ary has shifted with sustained ef-fect. Worldwide demand for ener-gy continues without a break and we have already reached an oil price of 100 US dollars a barrel. The demand for tubes for oil and gas exploration, transportation and energy generation is huge. Among the particular factors dictating this demand are the tremendous growth dynamics in the BRIC countries (Brazil, Russia, India and China) and the need to replace exist-ing power stations.stil It has long since ceased to be enough just to make quality tubes – customers de­mand comprehensive service. What do we offer our customers?eging As a business model, simply manu-facturing tubes is a thing of the past. We have been offering our customers far more for a long time now. We support them with customized solutions, from the initial

idea through to production. Our Trading Division, which is a global organization, and also the Group’s own research and product-based development facilities play an out-standing role. As a Group, we of-fer consultancy, production, sup-ply, an international logistics net-work and other support functions, all from a single source.

stil The companies that make up the Tubes Division have changed their names and logos. What were the reasons behind this?eging Our brand name is Salzgitter Mannes-mann. What we are doing is combining the Mannesmann product name, which is rec-ognized worldwide as a synonym for quali-ty and competence in tubes, with the success story that is Salzgitter. For this reason, as has already happened at the Trading Division, we have prefixed all of our companies with the name “Salzgitter Mannesmann”. So both the Tubes and Trading Divisions now equally underscore the solidarity between Salzgitter and the synonym for tubes (Mannesmann).

The natural gas pipeline across the Baltic Sea

The pipeline will connect Russia and the European Union

Wolfgang Eging

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Planned Nord­Stream­Pipeline

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The new Number One in EuropeHeaded by MRW, Salzgitter’s Tubes Division continues its international growth course

A new family member has joined the Tubes Division with the ar-rival of Salzgitter Mannesmann Precision GmbH (SMP). In fu-

ture, the Division’s precision tubes activi-ties will be amalgamated under the um-brella of this unit based in Mülheim an der Ruhr, which will function as an inter-mediate holding company. The Mannes-mann Robur business in the Netherlands is not being integrated, but will instead retain its independence as a successful secondary brand in the precision tubes segment, majoring on heat exchanger tubes.

Salzgitter AG’s acquisition of French specialist manufacturer and former Val-lourec Group member Vallourec Préci-sion Étirage (VPE) had previously been approved by the EU antitrust authorities. Besides VPE and Mannesmann Präzisrohr GmbH, another old acquaintance joins the new Precision Tubes Group: The Zeithain seamless tubes plant in Saxony, previously owned by Vallourec & Man-nesmann Tubes, has also been taken over and under its new name Mannesmannro-hr Sachsen GmbH will safeguard supplies of hot rolled tubes (loops) to the preci-

sion tubes plants in future. It is also being merged with its neighbor Mannesmann-ring Sachsen GmbH. MHP and VPE were already heavyweights in their own right, but in the European theater this new alli-ance now ranks as the undisputed market leader in seamless and welded drawn pre-cision steel tubes. As a combined under-taking with annual sales approaching 500 million euros and a workforce of around 2,700 employees, it can lay claim to a good quarter of the relevant market in the EU. In future, however, SMP will also play an important role outside of Europe.

At MHP and VPE the automotive in-dustry and its suppliers feature strongly on the customer lists. The mechanical engineering and power generation in-dustries also rank as key business part-ners of the two sister companies. The steel tubes plant in Zeithain, with a 400-strong workforce, is now trading under the name Mannesmannrohr Sachsen GmbH, and will play a central role in the future of Europe’s precision tubes market leader. Major investments run-ning into millions will ramp up annual capacity from 170,000 tons to over 200,000 tons.

The Precision Tubes Group headed by Salzgitter Mannes-mann Precision GmbH, part of the Tubes Division of Salzgitter AG, is consolidating its position in the North American (NAFTA) mar-ket, where the outlook for growth is excellent. With the acquisition of Mexican company Bresmex Tube-ria S.A. de C.V., SMP now has its own production facility in the re-gion. In future, the company will trade as Salzgitter Mannesmann Precisión S.A. de C.V. With a work-force of some 100 employees, the plant manufactures welded drawn precision steel tubes in the metrop-olis of Guadalajara. High-quality shock absorber tubes for the auto-mobile industry feature among its principal products.

SMP grows in Mexico

Pipes for two pipelines in the Middle EastLucrative 200,000 ton order for EUROPIPE

Profitable pipes business for Salzgitter,” the Frankfurter Allge-meine Zeitung recently pro-claimed. It was news from the

Persian Gulf that prompted the FAZ to take a closer look at Salzgitter’s boom-ing Tubes Division. Two important pipe-line projects are about to get under way in the United Arab Emirates, both of which will make use of premium-quality 48 inch (1219 mm) OD pipes supplied by Tubes Division company EUROPIPE. The com-pany’s large-diameter pipes are in great demand. What’s more, from the Group’s perspective, these orders totaling in excess of 200,000 tons are a fine example of an efficient value chain, given that they were booked and processed by Salzgitter’s own Trading organization.

The two orders also underscore the suc-cess that has resulted from the decision to intensify marketing activities in this oil-

and gas-rich region of the Arabian Penin-sula. Trading subsidiary Salzgitter Mannes-mann International overcame fierce com-petition to win the orders for the two pipe-lines which will link booming Abu Dhabi with the neighboring Emirate of Fujairah. The 250 km pipeline to be built by local energy giant Dolphin Energy will transport natural gas coming ashore from Qatar at the Taweelah terminal to Fujairah to fuel a new gas-fired power station. EUROPIPE will supply the entire quantity of pipes re-quired amounting to some 120,000 tons.

Another 97,000 tons (almost 160 km) of pipes will help to build the oil pipeline commissioned by state oil company IPIC which will run parallel with the gas line across a huge tract of the desert sands of the United Arab Emirates. This pipeline will also serve the Emirate of Fujairah, transporting oil produced in Habshan over a distance of 360 km to a new shipping ter-

minal on the Gulf of Oman, where it will be loaded on board supertankers. The project has a politically sensitive back-ground, in that the pipeline bypasses the Straits of Hormuz, a narrow passage which in times of crisis threatens to quickly be-come a serious supply bottleneck.

The pipes for this oil pipeline will be manufactured in the second half of 2008. Meanwhile, production of the large-diame-ter pipes for the gas line has already com-menced at the EUROPIPE works in Mül-heim an der Ruhr and Dunkirk (France). These orders, which will help to safeguard capacity utilization through to February 2009, are not the only ones with such a far-reaching effect. Others, such as the spec-tacular record order for the Baltic Pipeline will extend until the year 2010.

As the FAZ succinctly put it, “The tubes business is a success story for the Salzgitter steel Group.”

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The pipelines in the Gulf regionEUROPIPE is to supply the pipes needed for both the gas line commissioned by Dolphin Energy from Taweelah to Fujairah (orange) as well as for the IPIC pipeline from the oil fields in Habshan to Fujairah (gray)

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We couldn’t wait for Prince Charming”

Salzgitter AG has established a new di-vision following its acquisition of Klöckner-Werke AG. In February 2008 we talked to Dr. Heinz Jörg Fuhrmann, Deputy Chairman of the

Executive Board with a dual remit covering Fi-nance and the Technology Division, about di-versification and sustainable management.stil Sustainability is one of those in-words that many people seize upon. What do you associate with the term?dr. heinz jörg fuhrmann To me it means not changing one’s values as if they were a shirt, nor, for that matter, the opinions and the goals that are based on those values. That ap-plies both privately and professionally.stil What role does sustainability play in the corporate development of Salzgitter AG?fuhrmann A very decisive role … Preussag Stahl AG and the company that preceded it were already managed in the same way by our predecessors in terms of business policy and investment, albeit with significantly less free-dom of movement. The key elements of sus-tainable corporate development as we under-stand it are: Attractive products, modern and well-maintained plant and facilities, loyalty to the workforce and sound finances. These fac-tors don’t change.They stand for dependability, inwardly and outwardly. And they create an environment in which the changes that we have made – proactively, but never under duress – can be accepted and can succeed.stil Since September 2001 Salzgitter stock has been included in the MDax and has recent-ly been considered as a candidate for the DAX. What are the reasons behind this positive view?fuhrmann Whether at a personal, individ-ual level or on a grand scale, there is no better starting point than to be vastly underestimat-ed. If you then put on a far above average per-formance that exceeds expectations, you have the advantage of surprise. Of course, the steel boom in recent years has helped us. Our com-petitors all had the same wind behind them, but the fact is that for years now we have out-sailed most of them in terms of both results and the development in our share price.stil The development in the price of Salzgitter stock is something of a Cinderella story. What were the factors behind this development? How were new investors induced to take an interest in the company?fuhrmann We couldn’t wait for Prince Charm-

ing to appear. We had to shake off our wall-flower image for ourselves. On the other hand, from 1999 onwards we have had pro-gressively more support from analysts and fund managers who liked our take on busi-ness policy – conservative and by no means loud, but off the beaten track in terms of strategy – and whom we number among our friends to this day. My colleagues and I have never promised results that we couldn’t deliv-er. That works – that is sustainable.stil For all that, we can’t help but ask what happened recently, with the share price falling by around a third …fuhrmann … You’re right to ask, and it gives me the opportunity first of all to point out that this drop in price has absolutely nothing to do either with Salzgitter’s results or with our communication. The fact is that a lot of institutional investors, mainly abroad, have had to compensate for losses elsewhere – we’re talking here about the subprime cri-sis – by taking profits on positions that have done very well, Salzgitter among them! What’s more, long-term developments are far more meaningful than short-term fluctuations. stil The Salzgitter is a mid-sized steel and tech-nology group that is highly profitable. How does the company protect itself against the influence of shareholders who may be less than welcome?fuhrmann Well, of course anyone can buy shares and take a stake in Salzgitter AG. On the other hand, it is equally legitimate for us to appreciate shareholders who share our con-victions and are willing to stay with us over the years. The very important 25.2 percent stake held by the State of Lower Saxony to-gether with the 10 percent of the stock that we hold ourselves adds up to a position that is unlikely to be upset by “unwelcome suitors”.stil State involvement is frowned on in Anglo-American circles because it raises the specter of restrictions on entrepreneurial freedom. How do you counter this attitude?fuhrmann Quite simply by pointing to our competitive performance that clearly has not suffered because of State involvement, and also to the attitude that Anglo-Saxon govern-ments are just as likely to adopt in the face of the impending takeover of a major company by, let us say, not entirely welcome foreign in-vestors! It would be good to see a little more self-confidence in this country – maybe we should take a leaf out of France’s book.stil With the acquisition of Klöckner-Werke

AG, Salzgitter laid the foundation for the new Technology Division. What is the strategy be-hind this?fuhrmann Growth through diversification into sectors of industry that are specifically not subject to the rolled steel and tubes cycle. This will give our Group stability, above all if the steel boom should come to an end. Be-sides, one should never be so doctrinaire as to turn down opportunities that present them-selves just because they might call for a lit-tle persuasion, internally as well as external-ly. Mannesmannröhren-Werke was a prime example, and Klöckner will be another.stil How do you assess the potential for growth and development in the field of beverage filling and packaging machines?fuhrmann Rising standards of living in gener-al and specifically the increasing call for hy-giene will ensure continuing strong demand, in developing regions in particular. In our lati-tudes, the consumer goods sector is powered by continuous product innovation. We have entered an industry that marches to a differ-ent tune than steel and tubes, but is none the less exciting. Here too, we look forward to playing an active role in shaping the future. stil Finally, one last question for the latest and also the longest-serving Executive Board mem-ber of the new Salzgitter AG: What have been the most important features in the way the Group has changed over recent years?fuhrmann The most striking change has taken place internally, but of course it has also had some highly favorable effects on our ex-ternal image. When I joined Preussag Stahl AG in 1995, and a year later when I was ap-pointed to the Executive Board, there was a strict hierarchy in the way the business was managed. Every decision of any relevance had to be referred to the Boardroom. The relation-ship between the directors was – to be dip-lomatic – not quite ideal. Today, the Group is largely decentralized and the atmosphere of cooperation on the Executive Board – com-pared with other companies – is very, very good. Of course, in our present configuration we have yet to be put to the test – in the face of genuinely hard times, whether economi-cally or in terms of business policy – but I am optimistic that we will pass with flying colors.This pattern of transparent and cooperative relations is being carried over to our em-ployees, and this is something that will bene-fit all concerned.

“Interview with Executive Board member Dr. Heinz Jörg Fuhrmann

Dr. Heinz Jörg FuhrmannExecutive Board Member Finance & Technology of Salzgitter AG

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It all began in the summer of 2006 with a programmatic, but by no means specific comment by Dr. Wolfgang Leese, Chair-man of the Executive Board of

Salzgitter AG. To quote from an arti-cle in the Financial Times Deutschland, “In addition to manufacturing steel and tubes, the Salzgitter Group intends to develop a new division to reduce its de-pendence on the cyclical steel business.” Meanwhile the intention has become a reality: The long-established Klöckner-Werke AG is now part of the Salzgitter Group where – together with its subsid-iaries – it now forms the core of the new “Technology” Division.

Having fulfilled the requisite condi-tions and in particular received the nec-essary approval by the EU Commission, effective July 5, 2007, Salzgitter AG ac-

quired a further 78 percent of the shares in Klöckner-Werke AG, lifting its previ-ous 5 percent stake to 83 percent of cap-ital stock (STIL reported). This stake has meanwhile been further increased to around 86 percent. “As a well-fi-nanced majority shareholder with ex-tensive industrial experience, Salzgit-ter AG will in future play an active role in shaping the strategic and operation-al development of the Klöckner-Werke Group,” explained Dr. Heinz Jörg Fuhr-mann, Salzgitter Executive Board Mem-ber with responsibility for Finance and Technology. Effective from the same date, the Klöckner-Werke Group com-panies have been integrated into the financial accounts of Salzgitter AG. Klöckner-Werke AG is now the nucle-us of a new “Technology” Division estab-lished alongside Salzgitter’s existing Steel,

Tubes, Trading and Services Divisions. Klöckner-Werke AG is itself an in-

dustrial holding company whose subsid-iaries operate on an international ba-sis with a total of 27 production plants and 25 sales and service locations. Its business activities are centered on KHS AG, Dortmund, which ranks among the world market leaders in beverage fill-ing and packaging systems. This business area accounts for around 86 percent of Klöckner-Werke Group sales. The com-pany is also active in the fields of plastics processing machinery manufacture and food processing technology.

Klöckner-Werke AG is a quoted com-pany whose shares are listed on sev-en German stock exchanges and in Xe-tra trading. The Management Board is composed of Roland Flach (Chairman), Maternus Gemmel and Valentin Reisgen.

Growth and diversification in technologyKlöckner-Werke: Salzgitter AG has now increased its stake to 86 percent of capital stock. The acquisition forms the core of the new “Technology” Division

In 1923 the companies amassed by Peter Klöckner since 1886 in the coal, steel-making and processing

industries were amalgamated to form KLÖCKNER-WERKE AG. In the 1960‘s the Group broadened the scope of its ac-tivities to include plastics processing and mechanical engineering. Soon after, in 1965, Klöckner Pentaplast began produc-ing rigid plastic films.

Some 14 years later a film manufactur-ing plant was established by Klöckner Pentaplast of America. In 1979 the Group entered the beverage machine in-dustry with the acquisition of Holstein and Kappert. This was followed by an in-creasing involvement in filling and pack-aging technology, as well as automobile components.

The disposal of the steel production business in 1994 was followed by a delib-erate process of concentration. By 1999, the European businesses supplying the automotive industry and other non-core activities had been sold as Klöckner-Werke parted company with units which entailed high levels of investment and risk, but offered a comparatively low re-turn on capital. This was paralleled by a substantial expansion of the high-yield-ing films business in Europe and Ameri-ca. The range of filling and packaging technology products and services was also broadened through acquisitions.

Against the background of the pro-gressive globalization of the individual business areas and their need for growth, a further step in the concentration proc-ess was taken in 2001. In October that year the films business comprised by the Klöckner-Pentaplast Group was sold for a price of 925 million euros. The pro-ceeds of the sale were earmarked in par-ticular for investment in other equity in-terests.

The Group’s industrial activities today comprise the companies of the Filling and Packaging Technology division and the units that make up the Other Indus-trial Holdings division.

Since July 2007 Klöckner-Werke AG has been a member of the Salzgitter AG Steel and Technology Group based in Salzgitter, which holds around 85.6 percent of Klöckner-Werke AG voting rights.

Klöckner-Werke AG – the historyA stock corporation since 1923 with the emphasis now on filling and packaging technology

KHS is one of the world market leaders

in filling systems

KHS AG, Dortmund – an interna-tional manufacturer of filling and packaging systems for the bev-

erage, food, and non-food industries – was established in 1993 with the merger of Holstein & Kappert AG of Dortmund, founded in 1868, and Seitz-Werke GmbH, which was established in 1887 and lat-er became SEN AG, Bad Kreuznach. The company is a wholly-owned subsidiary of Klöckner-Werke AG.

In addition to its overseas production plants in the USA, Mexico, Brazil, India and China, KHS AG is also maintaining several plants in Germany. Dortmund is home to the compe-tence center for cleaning and pasteurization technology, as well as labeling and inspection systems. Bad Kreuznach ranks as the center of competence for beverage technology, combin-ing the following aspects: Filtration, beverage

blending technology, high-gravity brewing sys-tems, flash pasteurization and degassing sys-tems, as well as rinsing, filling and sealing sys-tems for bottles and cans. The kegging technol-ogy competence center is located in Kriftel. At its plants in Kleve and Bad Arolsen, KHS manufactures packing systems with an em-phasis on the most advanced, leading edge fi-nal packaging. In Worms the focus is on pal-letizing systems and solutions for both pack-ing and unpacking. Aseptic cold filling tops the bill in Hamburg, while KHS in Niederzis-sen offers a comprehensive range of inspec-tion systems for the industry. With a work-force of more than 5,000 employees world-wide, the KHS Group today generates sales approaching one billion euros. KHS is a world market leader and preferred supplier to the packaging industry with a focus on bever-age applications and complete plants.

KHS AG: A global player in packaging As one of the world market leaders, KHS has numerous facilitiesabroad, in addition to eight plants in Germany

Cheers! A filling plant for PET bottles in operation

Even large containers can be filled as well

technology technology

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© KHS AG 2007 15

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KHS Büros KHS Agenturen KHS Produktionsstätten

KHS betreibt 14 Produktionsstätten weltweit, 8 in Deutschland, 2 in den USAund je 1 in Mexiko, Brasilien, Indien und China

Waukesha

ZinacantepecSarasota

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KHS production plants KHS agents KHS offices

Represented worldwideKHS operates 14 production plants worldwide including 8 in Germany, 2 in the USA and 1 each in Mexico, Brazil, India and China

Desma Elastomertechnik, based in Friedingen, has ranked as one of the world’s leading manufacturers of rubber / silicon injection molding machines for 40 years now. In addition to

conventional vertical and horizontal machines with a clamping force of between 250 kN and 40,000 kN, the company also produces rota-ry, pump stator and C-frame machines as well as presses. Outstand-ing developments in recent years include the highly innovative BENCHMARK clamping system for vertical machines, the patented FIFO A injection unit as well as cold runners with a hydraulic needle shut-off system (FlowControl), ITM and the DESFLEX system to minimize waste. When it comes to complete systems, DESMA is the world market leader with its own high-performance mold making facility. The company’s extensive range of technical plant and equip-ment provides the ideal basis for efficient process development, as well as customer-specific training. Desma Elastomertechnik employs a workforce of over 300 members of staff.

Klöckner Desma Schuhmaschinen GmbH, based in Achim, manufactures special machines for the footwear industry. Products range from injection molding machines, molds, ro-

bots and automation systems through to complete factory planning. The company also makes special machines for other technical appli-cations. With a workforce of 176, the company expects to generate sales of around 37 million euros in 2007. In 2003 a subsidiary was es-tablished in China where 28 members of staff are currently active.

Klöckner Hänsel Processing GmbH, Hanover, is a supplier of plant and systems to the confectionery industry. From individual machines through to complete production plants,

the company can fulfill virtually every requirement for the manu-fac-ture of confectionery. The roots of Klöckner Hänsel Processing stretch back to the historic Otto Hänsel company founded in Dres-den-Freital in 1911. The works have been located in Hanover since 1948, with the present factory and office premises on Lister Damm doing duty since 1952. For over 90 years, KHP has been supplying processing equipment and packaging machinery for the confec-tionery industry and is one of the few companies that can point to such long experience in this field. KHP operates worldwide in co-operation with its numerous agencies in almost every country on earth. Over the past 20 years, KHP has specialized in increasingly greater depth in processing systems and is now the leading supplier of process equipment for the confectionery industry. New and ever more efficient machines and processes are constantly being devel-oped for the manufacture of confectionery products. The compa-ny’s applications center known as the CandyLab carries out devel-opment work for both KHP and its customers and experiments with completely new products. Here, engineers develop concepts and customer-specific solutions for high-quality and highly effi-cient plants and systems.

RSE AG is a real estate company that invests in commercial properties in Germany. The majority shareholder in RSE AG is Salzgitter AG which holds a 99.56 percent of the stock.

Klöckner Desma Elastomertechnik GmbH

Other Klöckner-Werke AG companies

Klöckner Desma Schuhmaschinen GmbH

Klöckner Hänsel Processing GmbH

RSE Grundbesitz- und Beteiligungs-AG

The Group’s machines are equally at home in the footwear and confectionery industries

Fruit juice and beer top the list

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S A filling plant: General view – and a keen eye for detail (right)

With the acquisition of SIG-Beverages and the ensuing integra-tion of PET blow molding technology, Salzgitter AG has injected decisive new strength into the Technology Division. The vendor is the Swiss SIG Group.

When Salzgitter first acquired Klöckner-Werke AG and entered the market for special-purpose beverage filling and packaging systems, the company clearly stated that “Salzgitter AG intends to play an active role in shaping the future strategic and operational development of Klöckner-Werke.”

The first significant step has now been taken with the purchase of SIG-Beverages. In the dynamically growing market for plastic bottle technology, the newcomer to the Technology Division will

in future enable Klöckner-Werke subsidiary KHS to offer complete system installations from a single source. KHS already has a long history in this market, and by closing this gap in its product port-folio, the company can now substantially enhance the service it of-fers. SIG-Beverages employs some 480 staff, based mainly in Ger-many, and recorded sales of around 150 million euros in 2007.

KHS AG ranks among the world market leaders in beverage fill-ing technology. However, in the field of PET blow molding tech-nology, in the past suitable equipment had to be sourced from ex-ternal suppliers. This acquisition puts in place another of the re-quirements to enable KHS to supply every element of its filling sys-tems from a single source.

New addition to the Technology DivisionAcquisition of SIG-Beverages adds PET technology to the Klöckner/KHS portfolio

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On the offensive with high-quality productsWide-ranging investment program in steel

Salzgitter AG intends to further ex-pand its position as a niche sup-plier with competitive advantages in cost structures, product qual-

ity, productivity and flexibility as well as closeness to customers.

With these aims mind, the company has meanwhile formulated its “Salzgitter Steel Strategy 2012” – an investment pro-gram tailored to generate decisive inter-nal growth. In the meantime, parts of the program have already been implemented.

“With this ambitious investment pro-gram we are pursuing our overrid-ing corporate objective, namely to pre-serve the independence of our enterprise through profitability and growth,” re-ports Hans Fischer, the Executive Board member at SZAG with responsibility for Steel. These investments will enable the Group to substantially step up the pace of its high-quality steel products offen-sive, while creating up to 500 new jobs in the process.

The entire program is valued at around

1,7 billion euros and comprises four projects to be implemented by the com-panies Peiner Träger, Salzgitter Flach-stahl and Ilsenburger Grobblech, as well as the manufacture of HSD steels using strip casting technology.

A second electrofurnace will be built in Peine to produce crude steel, increas-ing the production capacity at the plant to around two million tons of crude steel per year. This will result in an expan-sion of the precision metallurgy facility. Here, the customer specified properties are achieved through alloying and other pro-cess stages at the ladle furnaces and vacu-um plants. The continuous casting line in Peine will be fitted out for the production of slabs and the two mill trains will also be modified. The capacity of the heavy sec-tion mill will be increased and the uni-versal medium section mill, known as UMIT, will be adapted to produce spe-cial sections for applications such as fork-lift trucks. In addition, substantial invest-ments will also be committed to logistics

in order to cope with the increased volume of materials (for example, scrap, input stock and finished prod-ucts). The package of measures is ex-

pected to be completed by 2010.In Salzgitter the production of pig iron

will be optimized. In addition, a fourth continuous casting line will be built to produce thick slabs up to 350 mm. The precision metallurgy facility will be ex-panded, and the capacity of the hot wide strip mill will be increased to 4.5 million tons. Meanwhile, Ilsen-burg will benefit from several smaller investments in the plate mill.

A decisive step towards a new form of rolled steel production will be tak-en with the introduction of Belt Strip Technology (BeST). A pilot plant is to be built in Peine for continuous strip casting which will put the experi-ence gained by the Salzgitter Mannes-mann Forschung research unit in co-operation with the Clausthal Universi-ty of Technology into practice in an in-dustrial context. The process involves pouring liquid steel horizontally di-rect from the ladle to form a thin strip. The strip is then rolled directly to pro-duce finished hot strip, which can then be processed into cold-rolled strip as required. The decisive advantages of the process include the omission of en-tire production stages and the ability to produce innovative grades of steel, among them HSD (High Strength and

Ductility) steels. As their name implies, these high-manganese steels developed in cooperation with Corus are distin-guished by high strength coupled with high ductility. HSD steels have been developed for numerous applications which typically combine complex ge-ometric shapes with a need for great strength. The new plant is targeted to produce the first HSD steels by the end of 2009.

Salzgitter AG has already imple-mented one extensive program of in-vestment in plant and processes during the period from 2000 to 2006. Among the important elements of this pro-gram were the development of surface treatment with the construction of a new strip coating plant and a second hot-dip galvanizing plant, an initial modernization of the hot wide strip mill, the recommissioning of blast fur-nace C, a third continuous casting line, a beam blank plant in Peine and an in-tensive cooling plant and a cold leveler in Ilsenburg.

Currently, the power station in Salzgitter is undergoing complete modernization and a continuous pick-ling line and hot strip cut-to-length line are under construction, among other projects.

The capacity of the hot strip mill will be expanded over the coming years

The Group’s own power station in Salzgitter is currently being modernized The existing electrofurnace in Peine will be joined by a second unit

Salzgitter Steel Strategy 2012 “We are increasing integration within the Group”With its “Salzgitter Steel 2012” strategy, the Steel Division of Salzgitter AG aims to take a decisive step forward in terms of growth. stil international talked to Hans Fischer, Executive Board member Steel, about the most important changes.

stil By 2012, the Steel Division of Salzgitter AG aims to take a decisive step forward in terms of growth. Which are the most significant individual projects?hans fischer The overall “Salzgitter Steel 2012” project is divided into the four sub-projects PTG 2010, SZFG

2012, ILG 2010 and HSD Steels/Thin Strip Casting. With the construction of a second electrofurnace, crude steel capacity at Peiner Träger GmbH (PTG) will increase to around two million tons per year. In addition to input stock for beam production, the works will then also turn out slabs for customers such as Group member HSP Hoesch Spund-wand und Profil GmbH, enabling us to reduce the quantity of slabs bought in for sheet pile production.stil What are the strategic objectives behind these investments?fischer This strategy is another step on the road towards differentiating the Salzgitter Steel Group from its competitors. We are broaden-ing our product variety and pursuing our stra-tegic decision to manufacture higher quality steels. At the same time, by introducing new technical facilities, we are increasing our flexi-bility and enhancing production capacity. The Salzgitter Group regards itself as a niche play-er. Our strategy is not one of dominance, we prefer to concentrate on close customer loyal-ties, proximity to the markets and flexibility.stil How do we differ from the competition?fischer These investments will increase the already high level of integration within the Group as the individual companies become even more closely harmonized with one another. Our research unit Salzgitter Mannes-mann Forschung has a decisive role to play in this context. This unit combines the Group’s research and development competence, and dovetails closely with the manufacturing com-panies. Solutions are developed in a process of tight-knit cooperation, which involves Techni-cal Consulting as well as our customers and university partners.P

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1. New formiNg press The new Dieffenbacher impress hydraulic press delivers a pressure force of 1,000 tons and features analytic capabilities. The press is used for material characterization, as well as for component testing and custom-er projects.

special emphasis was placed on high pressure force, analytical capabilities and on the speed profile. This high-speed try-out forming press with its hydraulic cylin-der-accumulator drive meets all of these key requirements. Thanks to its capabili-ty of running at a controlled speed from 1 to 500 mm/s, existing customer presses can be simulated. Consequently, the forming Technology Department is able to replicate customers‘ “press units” at the salzgitter location in the course of joint projects.

The press also meets the current trend to-wards press hardening in the automotive industry. The steel sheet is heated in a new, portable furnace and transferred directly to the tool at a temperature of 950 °C. The panels are formed to components at the highest possible press speed and are sub-sequently cooled inside the tool. This pro-cess delivers mechanical strengths up to 1,600 mpa.

2. TesT rolliNg millThe new plant allows the representation of the entire process chain, from hot-rolled strip to hot-dip galvanized cold-rolled strip and yields a precise image of process-es within the material.

The plant supports various configura-tions for cold-rolling, post cold-rolling or skin passing of very soft steels, as well as ultimate strength steels. The overall form-ing grades correspond with the tandem mill of salzgitter flachstahl gmbH and are even surpassed in some instances. The

cold-rolled or skin-passed test objects are inspected and processed further under laboratory conditions. The mill is capable of rolling high-tensile steels with elonga-tion limits of 1,500 mpa, high cold-rolling grades and under variable strip tension.

Clients benefit from production plant-oriented material and process develop-ment, as well as from the processing of small batches at live cold-rolling condi-tions, added value in terms of cost and time savings, in addition to the advantages of processing new steel grades under test conditions.

The cold-rolling section in the 4-high roughing mill is equipped with rolls with a diameter of 150/360 millimeters, while rolls with a diameter of 360 mm are availa-ble for skin passing in 2-high operation.

3. HoT-Dip galvaNiziNg simulaTorThis simulator is a vital aspect in the ex-

pansion of the surface Technology Depart-ment of salzgitter mannesmann forschung gmbH (szmf), and supports the repro-duction of production processes in hot-dip galvanization plants, the testing of new process chains, and the development of new products.

High-quality hot-dip galvanized steel sheet is a material in great demand. Two large-scale plants at the salzgitter location turn out products for the automotive in-dustry, the building and construction sec-tor, as well as serving the household ap-pliances industry.

The galvasim hot-dip galvanization simulator by vatron supports the optimi-zation and the analysis of active produc-tion processes.

This equipment represents a further milestone in terms of the optimization of processes that encompass material pro-

duction, coating processes and the cus-tomization of product properties. a spe-cial focus is set on the impact of alloy ele-ments on steel surfaces. especially the new, higher-tensile steel grades contain higher concentrations of alloy elements. The sim-ulator now allows the experts at salzgitter to precisely examine the effect of such ele-ments on the galvanization process and determine steps to be taken to minimize such effects. furthermore, the unit sup-ports the development and testing of in-novative zinc-alloy coating materials with tailored functionality and enhanced corro-sion protection.

4. aNNealiNg simulaTorThis unit is used to map and represent

materials and material development throughout the process chain of steel production. it enables the precise reproduction of hot-dip galvanization processes at laboratory scale and delivers reliable data and information on the properties of annealed, cold-rolled and hot-rolled strip products in the prelimi-nary phases prior to delivery.

The simulator supports the annealing of very soft steels as well as high-tensile steels. The annealing temperatures and process parameters correspond with those of the hot-dip galvanization plants of salzgitter flachstahl gmbH.

Clients also benefit from production plant-oriented process development, accelerated integration of new steel grades into hot-dip galvanization processes, as well as the optimization of grades for surface finishing, and added value thanks to great cost efficiency and time savings. The unit is capable of processing test objects with a maximum diameter of 450 mm x 250 mm x 3.00 mm.

New large-scale equipment for researchall-new forming press, test rolling mill, hot dip galvanizing simulator, annealing simulator

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in commissioning the new pilot plant, salzgitter ag is strengthening its po-sition as a premium provider of steel.

“research and development are an es-sential foundation for our overall strate-gy of operating as a successful niche play-er,” explained Dr. wolfgang leese, Chair-man of the salzgitter ag executive Board on the occasion of a presentation delivered this November to some 130 customers and partners.

The new pilot plant forms a core area of salzgitter mannesmann forschung gmbH (szmf), a 100 percent subsidiary that acts as the group’s central research and devel-opment department.

around 11 million euros have been in-vested in a number of large-scale equip-ment items and buildings at the salzgitter location. “we now hold a leading position throughout europe in application oriented steel research and development,” as szmf managing director prof. Dr. matthias Nie-meyer emphasized.

The pilot plant will ensure that new steels are developed at a rapid pace, and processes optimized at the same time.

These capabilities form the foundation for achieving shorter product introduction cycles and robust series processes at customers.

The investments in the new pilot plant are embedded in the “salzgitter stahl 2012” strategy. “The three main objectives are achieving decisive production gains of plants and processes,” explains Hans fischer, executive Board member steel, “the increased production of customized, special products and niche products, as well as the enhanced flexibility of facilities and plants.”

prof. Dr. Karl-Heinz spitzer of the uni-versity of Clausthal outlined the key signi-ficance of partnerships between universi-ties and industry in research and develop-ment, as well as in the areas of education, training and personnel development.

Johannes Nonn, managing Director of salzgitter flachstahl gmbH, also empha-sized the resulting customer benefits: “The new pilot plant will enable the faster and targeted development and production of new product families, such as hot forged steels.”

“we are enhancing customer loyalization” interview with managing Director Prof. Dr. Matthias Niemeyer

stil How does the expansion of the pilot plant at the Salzgitter location fit into the Group strategy?prof. dr. matthias niemeyer we had some catching up to do with regard to large-scale equipment and facilities in the r&D area. with this

recent investment of some 11 million euros, we will considerably enhance customer loy-alization, and thereby also strengthen our position as a niche player in the steel branch. stil What are the positive effects of the expan-sion for customers within the Group and out-side? niemeyer we are now able to cover and represent all of the key steps of steel manu-facturing and further processing, including hot metal processes, alloying, rolling, form-ing and coating. we are able to develop pro-cesses faster and more efficiently, and pro-vide our customers with the information thereby gained in a timely manner. stil How is Salzgitter Mannesmann Forschung positioning itself in the worldwide steel research landscape with these investments? niemeyer we hold a leading position in application oriented research and develop-ment. The fact that we have bundled the research and development activities within the group in the areas of materials, surface and application technologies under a single roof, represents an advantage over competi-tors. we are very well networked and inte-grated with customers and the group’s own production facilities, and, as an independent research outfit, we are able to respond rapid-ly and flexibly. our work is also advanced and assisted by cooperation activities with the universities of aachen, Braunschweig, Hanover and Clausthal, as well as the mpi for iron research in Düsseldorf.stil What significance does R&D hold for the further development of the Group?niemeyer we are not only called on to adjust to the markets of the future in a timely man-ner, but also to play an active role in shaping and designing these markets. in the case of fundamental issues and tasks, it is important to bundle resources across various locations and companies, and thereby achieve goals at a faster pace.

Consequently, an even greater emphasis will be placed on the aspect of process and product development in future.

During the presentation (from right to left): Prof. Niemeyer, Rainer Thieme, Dr. Leese, Prof. Peil, Prof. Ameling

“research and development are an essential foundation” presentation of the new pilot plant in salzgitter

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Demographic development and the resulting conse-quences for present and fu-ture societies have mean-

while become a central focus of discus-sion, not just in Germany. In addition to the knock-on effects on social secu-rity systems, it is above all employment issues that dominate the current so-cio-political debate. Companies are in-creasingly having to accommodate the fact that tomorrow’s world of work, and that of the day after, will be popu-lated by fewer workers. What’s more, the work to be accomplished must be managed by a workforce of a higher av-erage age and of a very different com-position. The staged increase in the re-tirement age and the abolition of partial early retirement at the end of 2009 will exacerbate the situation still further.

In order to respond without delay to the consequences of demographic change and thereby maintain and enhance the Group’s ability to compete and inno-vate in the long term, back in March 2005 Salzgitter AG launched Project GO – the Salzgitter AG Generation Offen-sive 2025.

Project GO is designed as a collective learning and development process. In the past 2 years, employees from all Group divisions have developed 90 programs focusing on such diverse aspects as corporate culture and leadership, personnel marketing and recruiting, human resources development and

qualification, work organization, working hours and pay, health / fitness and ergonomics and integration management. In the coming years these programs will gradually be rolled out at individual Group companies, if indeed they have not been implemented already.

GO – the Salzgitter AG Generation Offensive 2025 The project is geared to responding to the consequnces of demographic change in a timely manner

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stil Why has Salzgitter AG decided to initiate Project GO – the Generation Offensive 2025?peter-jürgen schneider As part of the demographic change in society that we have all heard about, in the coming years the pro-portion of older employees among the work-force as a whole is going to increase substan-tially. Legislative action such as the end of partial early retirement and the increase in the pensionable retirement age will empha-size the trend still further. stil GO is very broad-based. What is the thinking behind this approach?schneider Demographic change will impact the entire structure of society. The number of school and subsequently university stu-dents will decline, with corresponding effects on the labor market. So we can’t just concern ourselves with older employees, we also have to change the way we recruit the next gen-

eration. And there is no point in delaying preventive action until it is too late. stil When will we begin to experi-ence the first effects of demographic change?schneider We are already doing so. The numbers of children are in sharp decline, while the proportion of older people in our society is growing strongly. And this in turn is reflected in the workforce. stil So is GO also a way of safeguarding the future of the Salzgitter Group?schneider With GO we aim to offer our employees the prospect of fulfilling, value-cre-ating work through to the age of retirement. At the same time we also intend to safeguard the company’s ability to compete and inno-vate under changing demographic conditions.

stil Are the first specific steps already being taken?schneider Yes, by restructuring company pensions we have gone some way towards facilitating early retirement. Our in-house fitness centers offer the opportunity to keep fit and take preventive meas-ures against poor health, and with a broad-based human resources development system, efforts are cur-

rently being made at SZFG to substantially raise the level of qualifications among wage earners, as well as salaried staff. And there are a whole lot of other examples I could name.

GO – the Generation Offensive 2025 will form the basis of our human resources activities at Salzgitter AG in the years to come.

Demographic changes (see left) are making it progressively more difficult for German industry to recruit adequately qualified jun-

ior staff. Now more than ever, it takes com-mitment and imagination to inspire school pupils and students with enthusiasm for a technical career.

Experts are forecasting that by 2020 the number of pupils in schools will have fall-en by 18.6 percent, accompanied by shifts in school types, whereby schools focusing on practical training will be the losers. Over the same period, the traditional candidate base for industrial training courses and ap-prenticeships will decline by a third.

Already the problems in attracting young people to take up engineering- and science-based careers are not to be overlooked, due mainly to their choice of subject at university. In the coming years, the number of engineers entering retirement in Germany will exceed the number of graduates emerging from uni-versities.

In not a few cases, the choice of career at various entry levels is marred by irrational preferences and inadequate information and dictated by the structural availability of train-

ing places. The universities report vacancies in sectors that offer prime employment pros-pects, such as electrical engineering, for ex-ample, while in other fields the numbers of students is growing out of all reasonable proportion to the expected demand for em-ployees with such qualifications.

Choosing the right career path enables candidates to avoid failures and frustration, it conserves the financial resources of both in-dividuals and society, and it helps to preserve the economic efficiency on which our abili-ty to finance the welfare state ultimately de-pends. The need to improve career orienta-tion must therefore be a matter of concern shared by all social groups.

And that of course includes Salzgitter AG. The Group attaches great importance to safe-guarding the next generation of employees. For some years now, Salzgitter AG has used a whole raft of approaches to appeal to the rel-evant target groups.

To reach out to school pupils, school partnerships, school activities and practi-cal work experience are all designed to in-terest even the youngest in a technical ca-reer. All these measures are backed up by spe-cial events such as the Steel Campus staged

at the “Ideen-Expo”, the Ideas Fair in Hano-ver which attracted over 60,000 school pupils in the autumn of 2007. Under the guidance of trainees from Salzgitter AG, both girls and boys got better acquainted with steel as a ma-terial through the medium of play.

In June 2007, in a joint venture by Salzgit-ter AG and the phaeno “science theme park” in Wolfsburg, 70 groups drawn from Years 10 to 13 gained a lasting impression of what metal working is all about.

In order to address students, Salzgitter AG maintains close contacts with numer-ous universities in Germany through joint re-search projects, sponsored professorships, study grants, etc. The 15 or so annual gradu-ate careers fairs also play an important part. In 2007 for example, events were held at the RWTH Aachen University and the Technical University Brunswick.

In addition, Salzgitter AG also offers inte-grated degree programs, sponsors students studying abroad and awards various study prizes. “All of these approaches are aimed at safeguarding our next generation of em- ployees as well as making a contribution to so-ciety as a whole,” explained Peter-Jürgen Sch-neider, Personnel Director at Salzgitter AG.

Inspiring the next generation with a love of technologySalzgitter AG addresses school pupils and students with a diversified outreach

“The first steps are already being taken!”Interview with Peter-Jürgen Schneider Executive Board member at Salzgitter AG with responsibility for Human Resources

Peter-Jürgen Schneider

“Isn’t it good?” Two girls at the Steel Campus show off their rose made out of steel

Project: GO The Salzgitter AG Generation Offensive 2025

Corporate culture and leadership

Human resources development and qualification

Personnel marketing and recruitment

Work organization, working hours and pay

Health/fitness andergonomics

Integration management

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“Demand in India is set to increase”Interview with Heinz Groschke, Executive Board Member Trading at Salzgitter AG, about the markets in Asia and the USA

stil What significance does Asia have for Salzgitter Mannesmann International?heinz groschke The Asian mar-kets play a very significant role for the Salzgitter Mannesmann International group. For one thing, we buy steel in Asia for the inter-national markets, particularly in

China, India and Malaysia. Moreover, we play a part in developing business between different Asian countries, as reflected in the cooperation between our branches in China and Singapore. Singapore is, for example, a base from which we purchase steel products not only for sale on the European markets but mainly for customers in Malaysia, Indonesia, Vietnam,Thailand and the Philippines.stil Which of the Asian countries are likely to become increasingly important?groschke The demand for steel, in India espe-cially, will increase in the coming years. Vietnam, too, is developing outstandingly well. Naturally, countries such as Korea and Japan are extremely important in general terms, but not quite so significant for our business at present.stil Will the upswing in the region continue at the pace we have become accustomed to – or do you see any risks? groschke I am convinced that the upswing will continue, particularly in China, which has a steel industry of its own. Steel products will also continue to be exported, and I am con-fident that we will have a stake in this export business. Development in India has only just begun, and it is highly likely that the pace will increase. stil What opportunities for development do you see for the American steel and tubes market?groschke We are currently witnessing an exceptionally dynamic, but also healthy development in the markets in general. This also applies to the steel market, of course, even if some significant sectors such as for example the automobile industry are currently suffering from structural weaknesses. The oil and gas industry is particularly prominent in the USA, where efforts are being made to reduce the country’s dependence on imports. As a result there is a lot of exploration going on, which means that pipelines will be needed for transportation and distribution. From my perspective, this segment of the market is like-ly to develop strongly in the next few years.

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Peter Meyer must have a stomach of steel by now. Over the past 20 years the delicacies that have come his way have ranged from

scorpions to pigs’ ears, duck brains, tripe, and even dog (“I only found out after-wards what it was”). But the high point, if one can call it that, was undoubtedly a feast of snake. “The meat tasted good,” Meyer recalls, “but then I had to toast my opposite number with a glass of snake’s blood …. .” Which shows the lengths some people go to in order to close a deal.

Now aged 54, Peter Meyer has worked for the Group in Asia since 1988. As Man-aging Director of Salzgitter Mannesmann International (HK) Limited based in Be-ijing, he heads a team of 24 staff with of-fices in Canton, Shanghai, Hong Kong and Taipei. Business has been highly sat-isfactory for some years now. In 2006, Meyer’s team – in cooperation with the rest of the Salzgitter Mannesmann Inter-national Group companies – turned over around 600,000 tons of steel for the in-ternational market. The total for 2007 is likely to be 800,000 tons. Such figures il-lustrate both the current strong demand worldwide, as well as the headlong devel-opment in China’s burgeoning economy,

which grew by 11.1 percent in 2006 alone. We drove in from Beijing airport to

the office on the 8th floor of the mod-ern Sunflower Tower on Maizidian Street. The city is surprisingly western in ap-pearance. Endless traffic jams (1,000 new cars are registered every day in Beijing), countless construction sites (ready for the Olympic Games in August), noise, heat and smog. Peter Meyer smiles a little sad-ly as we drive: “When I came here for the first time 20 years ago, it was an adven-ture. There were very few western ho-tels, no street lighting, all the signs were strictly in Chinese – and when we went to the zoo people stroked my little daugh-ters’ red and brown hair to see if it was real …”

Business, too, has changed dramatical-ly in the intervening years. China has de-veloped from a net importer to an ex-porter of steel. Peter Meyer explains: “Up to 2004, imports still accounted for more than half of our business. A year later, steel coming into China made up only about a quarter of our trading volume. The reasons are obvious – as the fourth largest country on earth, China can sat-isfy its own needs.” Back in 1988 Chi-na was producing around 70 million tons

of steel. By 2006, output had risen to 429 million tons, and the upward trend con-tinues.

Faced with this situation, Meyer and his team had to completely rethink their operation: “Familiar customers we had dealt with over many years just melted away – so we struck up new contacts with the steel makers’ sales departments.” It is all the more remarkable that this dramat-ic about-turn that climaxed in 2004 was accomplished without a slump in busi-ness. Imports were largely replaced by ex-ports.

Time to call it a day. Peter Meyer shares a table with longstanding colleagues Liu Yan Haua and Victor Huang in the Ger-man beer cellar across the street from the office. They speak in English, as do all the office staff. The waitress brings Bavarian beer, roast pork and sausage. The place is crowded, with far more Chinese raising a glass than “long noses”, as Europeans and Americans are known here. In the morn-ing Meyer is flying off to visit a steel pro-ducer in Xiangtan, but for now he has a moment to relax.

What do you need to bear in mind in or-der to do business in China? Meyer, who acquired his skills in the early 70’s at the

The massive upswing in the Far East continues to be headed by China. In terms of steel, within a matter of a few years the country has developed from a net

importer to an exporter. Salzgitter Mannesmann International’s Beijing-based subsidiary is also chalking up strong figures. We paid a visit.

The Market in Asia A junk pictured against the unrivaled skyline of Hong Kong

The Asia team with Peter Meyer (10th from left) on the Great Wall. The map on the right shows Salzgitter Mannesmann International’s offices in Asia

Salzgitter Stahl trading company in Düsseldorf, before spending three years working for the Group in London, doesn’t need to think twice: “Someone once said to me here in China, ‘Even if you cannot un-derstand one another, it is important to maintain the correct facial expression.’ By which he meant that when you are trying to get a deal off the ground, it is important in the first place to observe the correct for-malities. You have to be friendly, smile a lot – and as far as possible don’t turn down anything your host puts in front of you.” Even if that includes scorpions …

Meyer continues, “The Chinese tend to be skeptical and as a matter of principle it is extremely important to earn their trust. Once you have done so, you can look for-ward to a long-term relationship.”

Negotiations are hard. “On principle, Chinese producers try to gain the upper hand.” A seasoned and savvy dealmaker,

Meyer is not to be outwitted, and he relies on another characteristic of the Chinese, namely their sense of fairness: “It is gen-erally enough for me just to remark that we both have to be happy with the terms of the deal.”

To this day, it is not unusual for Chinese partners to deliberately conduct nego-tiations at several levels of hierarchy. As Peter Meyer explains, “When we are buying steel, we have to make sure we don’t start off at too high a price, so we are able to give a little ground at every level – right up to the boss who makes the final decision. If we only accommodate one of the negotiators on price, the whole deal may come to nothing. Keeping face is everything in China.”

The following morning at the steel-works in southern Chinese city of Xiangtan, Peter Meyer and his colleague Laurence Chen sit down to negotiate

prices for the months ahead. The plant, which has been heavily modernized in re-cent years and employs a workforce of 20,000, is one of the main suppliers to the Salzgitter Mannesmann International Group, producing sheet which is regularly bought in for stockholders in Europe.

Before flying on to the Hong Kong of-fice, Meyer pays a quick call elsewhere in the plant. Two Chinese employees of the international certification specialist Bu-reau Veritas are inspecting the quality of a load of sheet destined for Indonesia. “We are supplying 4,000 tons in total,” Meyer continues. “The material will be used in Indonesia to manufacture pipes that in turn are needed to build a pipe-line in India.”

The trading activities of Salzgitter Man-nesmann Handel in China are centered on four areas. Most important of all is the business with Salzgitter Mannesmann In-

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Inspired by the nest of a bird - the Olympic Stadium in Beijing (top left). Peter Meyer with his colleagues at the Hong Kong office (top). A poster at the steelworks in Xiang-tan serves as a reminder that China is still a communist country (left). Eleven years after the hand-over to China, Hong Kong (above) remains a hub of the financial world

Salzgitter Mannesmann International USA: The Texan metropolis has become the center from which the Group serves the American market

A visit to Houston

Salzgitter Mannesmann International USA: When the company was founded in Houston six years ago with just a handful of staff, the prestige behind the name outweighed the business. Meanwhile things have changed immensely. In a matter of a

few years the company has become so far integrated into the international trading network that it is directly or indirectly involved in around 25 percent (!) of total Trading Group sales – a remarkable success story. And a good reason to pay a call at 1770 St. James Place, a modern business district not far removed from downtown Houston. Here the company leases half a floor in a rather unspectacular office block. Our first appointment is with Claus Gundlach, 52, the head of Salzgitter Mannesmann International, Houston. He learned his trade at Klöckner in Germany and has lived in the USA for over 25 years. Gundlach explains the main reasons for this success story ‘made in Houston’. The business in the USA is underpinned by integration within a global organization and by a team that now comprises 24 members drawn from nine different nations. “These are all highly qualified people without whom we would get nowhere around here.” The deals done from St. James Place mainly involve flat rolled products with the recent addition of tubes as well. Sales in 2006 amounted to over 500 million dollars; sights are set on

the magic billion mark. In the NAFTA free trade zone, the Houston-based company with offices in Chicago and Tupelo operates in close cooperation with colleagues at companies in the other member’s countries, Canada and Mexico. In addition to the business of selling, other functions essential to the trading operation are also fulfilled in Houston. The Traffic department, for example, ensures that goods ordered not only reach their port of destination, but on request are also delivered by barge, truck or rail to the customer’s doorstep. However, it is not just logistics that are important. No less than five staff members hack their way through the document jungle on behalf of customers, ensuring with meticulous care that, for example, every customs regulation is complied with. As logistics manager Lucila M. Guibu explains, “This job is much more complex in the USA than in Germany. Even accidental errors can have dramatic consequences.”

Finance and controlling is of equally great importance in the US market, and this department works closely with the head office in Düsseldorf, as well as providing administrative and accounting support for a sister company in Mexico. No wonder a growing number of customers have come to appreciate the level of service. Says Gundlach: “We believe in any case that the days of normal trading, just moving goods from A to B, are long since past.” His magic formula is

ternational in Düsseldorf. “We receive five or six inquiries every day from Ger-many,” says Meyer. One such request was for quotations for a potential order for Mexico. “Within two days we managed to speak to every suitable supplier and ob-tain their offers.”

Other inquiries arrive regularly from the sister company in Singapore with which the offices in China cooperate closely and which is responsible for, among others, the markets of Vietnam, Thailand, Indo-nesia, Malaysia and the Philippines. As Pe-ter Meyer explains, “This trade within the Asian region is our second most important source of business. The third most impor-tant region is currently North America/Canada, where we have been developing a significant volume of business in 2007.”

The fourth important area of busi-ness involves the importation of technical equipment. “There are traditional reasons behind this, given that the Salzgit-ter Group was once also engaged in plant manufacturing.” The Beijing office has just arranged the delivery of eight tunnel ex-cavators built by German manufacturer Terex for the Chinese railways. The project was valued at around five million euros and came under the heading of develop-ment aid, financed via the Kreditanstalt für Wiederaufbau.

How broad a range of products does Meyer’s team in China cover? “We are strong on exports of plate, and we also handle hot rolled sheet and strip, cold strip and surface-coated products. In the field of tubes we are free to source anything which

is not available from the Group’s own pro-ducers for the international markets – from spiral-welded line pipes to seamless and longitudinally welded tubes and pipes for oil and gas transportation. And we find Chinese producers are also competitive on merchant bar.”

It’s evening by the time Peter Meyer ar-rives in Hong Kong. After a brief visit to the office for a meeting with the three members of staff, it’s time to call it a day and stop off at a typical Asian noodle shop. This time there are no scorpions or snakes. Meyer has a bowl of soup followed by chicken and rice. “I like Asian food,” he remarks. But when asked what he miss-es most about Germany, he replies without hesitation, “the delicious cheese and all the wonderful sausages.”

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Tubes for the US company are discharged at the port of Houston …

…ready for pre-processing just a few kilometers away: Here threads are being cut into the ends.

“marketing trading”. For years the company has brought its US customers together with manufacturers in every part of the world – something that is still by no means standard practice in an industry which did its best to avoid this scenario in the past. Gundlach again: “We have a totally different take on this at the Salzgitter Mannesmann Handel Group. For one thing we stand by our margins. We have to work consistently hard for them. And by bringing customers and suppliers together, orders can be discussed in far more precise detail. The result is an entirely new and open atmosphere, which all sides appreciate. This three-cornered relationship contributes hugely to customer loyalty. For years, this way of working has ranked as one of the basic principles of the whole international Group and a foundation for our success.”

Trading is very much a people business. In the first year after the company was founded in Houston, a large number of customers and suppliers chose to follow the traders they had come to trust. They formed the basis on which the company’s success is built. But the growth that followed required other qualities as well: Flexibility and imagination, a sound financial base, and of course an effective global network to support both purchasing and exports from the USA, to other NAFTA destinations and elsewhere. Claus Gundlach thinks back for example to the years 2001 to 2003, when only very limited

quantities of steel could be imported into the USA. “We imported insofar as we were able, but in a very short time we developed a market within the USA and with the other NAFTA countries.” It was a case of seeing new opportunities and seizing them, a habit which is engrained in the Houston team to this day. Gundlach again: “If you once rest on your laurel, that’s when you start losing it.” The American way of thinking fits in well with the company ethos. “Americans are very innovative; there is a constant flow of attractive new openings for our products. What‘s more, they give everyone a chance to succeed.” Is trading a desk job? Absolutely not, in fact a good part of the year is taken up by traveling – around the world. In the course of which purchasing is an important aspect. After all, customers want what customers always want: The right material at the right time and at an attractive price. Thanks to the global network of the international Trading Group, these requirements can be fulfilled. In cooperation with colleagues in Düsseldorf, new suppliers are brought onboard and old relationships consolidated. Steelworks from russia to Brazil and from Thailand to China and the Ukraine have long since been part of the network. “Our customers are not the only ones to benefit from this international network and the open, friendly way in which we work together at the Trading Group. The Salzgitter AG manufacturing units also

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profit from these active customer relationships. The Group plants have strong order books at the moment,” says Gundlach, “and for flat rolled products, for example, Europe is without doubt the more important market. Nevertheless for high-quality products we and Salzgitter Mannesmann International are ready and willing to establish a beachhead for Flachstahl GmbH in the USA. There is a strong demand for the beams produced by Peiner Träger GmbH as well as for high-quality plate, especially the high-end tube grades from Ilsenburger Grobblech GmbH.”

The proportion of Salzgitter products sold has risen substantially since spring 2005. This is due, among other reasons, to the fact that the US company at this time took over distribution of Mannesmann Fuchs rohr tube products in the USA, an important business for the Group. Sales of special tubes used primarily in the USA as casings for oil and gas field exploration will reach around 40,000 tons this year. This figure will rise still further in 2007 with the sale of higher quality products, as soon as the scheduled investment in a 24“ line and a heat treatment plant in Hamm has been completed. In the tubes business as well, it is clear that the company in Houston has long since abandoned outdated trading practices. Pipe in particular is generally sold as “pre-treated”. In other words it is bought in with plain – unthreaded – ends and put into

store. Then, when customers place their orders, the pipes are supplied ex stock with threads pre-cut. Various subcontractors such as the firm of Grant Prideco close to the port of Houston cut the threads and fit a coupling ready for connection to the next length of tube. Stephen Munsell, Senior Manager at Salzgitter Mannesmann International explains: “This is a service which our customers appreciate.” Interpersonal relationships at the company follow the relaxed American pattern. respect is mutual, and there is always time for a joke between all levels of hierarchy. The pending workload is discussed at regular Monday meetings. “These meetings last an hour at most,” says Gundlach, “and by then everyone knows what’s happening; in all departments.” Efficiency and openness – the principle is evidently effective. Gundlach again: “Comparable firms in the US generally operate with twice the number of staff we have.” Two or three times a year the staff gets together after work for a happy hour to which customers are also invited. One evening at “McCormick & Schmicks” just round the corner; Michael Schäfer, chief buyer at Delta Steel, is there along with Jochen Seeba, his opposite number at ranger Steel – both are ranked among the leading steel wholesalers in the USA. The conversation over beer and plenty of appetizers ranges from last weekend’s barbecue to new business. No doubt about it, the success story continues …

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Stephen Munsell at the Salzgitter tubes storage depot

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Salzgitter 2007 • Motiv Weltall • Top Business Going Asia • 4c • Format A4 + 3 mm Bes. • ds • ET: 30.04.07 • DU: 03.04.07

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sal_IM_6.033_Weltall_A4GB 02.04.2007 16:37 Uhr Seite 1