[ferro-alloys.com]Germany's Thyssenkrupp completed the sale of its Elevator unit July 31, paving the way for a reshape of its struggling steel unit.

Sources expect an announcement soon on future plans for steel, but some said the company's Marine Systems unit will need to be consolidated first.

Thyssenkrupp CEO Martina Merz said in the July 31 announcement on the Elevator unit sale that it would use "the proceeds in the billions" to "transform" the rest of the company. The sale of Elevator to a financial consortium comprising Advent, Cinven and RAG Foundation is worth Eur17.2 billion.

Thyssenkrupp's major shareholder Cevian endorsed Swedish steelmaker SSAB for a takeover or partnership with Thyssenkrupp earlier in July, saying the company would be "best suited" for the steel unit. Market chatter and media reports have been mounting ever since with sources saying that SSAB would be a likely – but not necessarily popular – candidate for a possible tie-up.

Thyssenkrupp keeps 'options open'

A Thyssenkrupp spokesperson told S&P Global Platts that it continues to keep its options open. The company announced a revival of a possible merger in May without disclosing who the potential partners were. Merger talks between Thyssenkrupp and Tata Steel collapsed in 2019 and were seen as unlikely to be restarting as long as it remains uncertain what will happen to Tata's Port Talbot mill.

SSAB did not respond to Platts' request for comment. The Swedish company said however in an analyst call earlier in July it would look at mergers and acquisitions, but rather in the small- to mid-sized range. Despite this, SSAB remains a candidate in the view of market sources.

"SSAB would be tackling overcapacities first at Thyssenkrupp sites that are not running well," said a mill source, expecting a drastic "cutback" at the sites likely to infuriate unions.

Sources said that SSAB is likely to be withdrawing Thyssenkrupp's steel unit from the joint ownership of semis producer Hüttenwerke Krupp Mannesmann, currently jointly owned by Thyssenkrupp, Salzgitter-Mannesmann and Vallourec.

While employees and unions would prefer a solution with Salzgitter, the second biggest German steelmaker, this potential contender is thought unlikely to be able to take on the much-needed restructuring of Thyssenkrupp's steel unit.

"I would prefer a solution with Salzgitter, but the company is too small," a source close to Thyssenkrupp said.

Thyssenkrupp has been heavily affected by the demand slump during the height of the pandemic along with peers such as Salzgitter, Voestalpine and ArcelorMittal.

'Stahl AG' deemed unlikely

Marc Gabriel, analyst at Bankhaus Lampe, said that a potential arrangement between the two German steel companies – dubbed "Stahl AG" – would depend on how the pandemic will further unfold as a worsening economic situation could lead to the government increasing its protection of German companies.

"I don't see the 'German solution' coming. Only in the case if the COVID-19 crisis will be worsening because then the German government will be pushing the idea of a 'Stahl-AG'," Gabriel said, adding that Salzgitter could be taking over Thyssenkrupp's share of HKM.

Salzgitter has repeatedly stressed the need for consolidation in the European steel market due to excess capacity while steel demand was stagnant, but has not confirmed any merger talks.

(S&P Global Platts)

• [Editor:王可]