CEO of Thyssen-Krupp 'We Are Not Driving the Price Hike'

The head of German steelmaker ThyssenKrupp, 66-year-old Ekkehard Schulz, talks about the sharp rise in steel prices, competition from emerging economies like India, China and Russia, and the prospects for German industry in an age of globalization.


"Germany is clearly a winner" in the globalization game, according to ThyssenKrupp CEO Ekkehard Schulz -- in spite of a long decline in industrial jobs.
AP

"Germany is clearly a winner" in the globalization game, according to ThyssenKrupp CEO Ekkehard Schulz -- in spite of a long decline in industrial jobs.

SPIEGEL: Mr. Schulz, do you know how unpopular you are currently making yourself in large parts of the German economy, among your customers?

Schulz: Well, I haven't noticed any personal animosity against me. But it's clear that our customers aren't exactly pleased when we are forced to raise steel prices. Small to mid-sized companies are especially hard-hit, but so is the automobile industry. It's mostly because almost all commodity and energy prices have climbed to levels in the last three years that I have never before experienced in the 36 years I've been working in this industry.

SPIEGEL: How long can companies continue to bear such cost increases?

Schulz: The situation is certainly difficult for some businesses, especially with commodity prices rising together in all major markets. German industry is at a relative disadvantage in this respect.

SPIEGEL: ThyssenKrupp isn't suffering, at any rate. You can simply pass on higher ore prices to your customers. It's been said that you are taking advantage of your powerful position and refusing to abide by existing agreements. Is that true?

Schulz: Of course we abide by our agreements. Many customers signed a one-year agreement with us with fixed prices for 2008. We say to them: You have two options. You can stick to the current agreement. We're happy to do that. In that case, however, you can expect to see another significant price increase for 2009. And we cannot guarantee that you'll receive the amounts you need in 2009, because our quality steel is in short supply. Or you open up the package and negotiate a new term, let's say from July 1, 2008 to June 30, 2009. This gives both sides security in terms of estimating prices.

SPIEGEL: That's one way to put it. But one could also say: It sounds a lot like a blackmail scene in a mafia film.

Schulz: Those are the facts. We want to continue existing partnerships, but we are not driving the price hike. We are being driven by it. We have to pay drastically higher prices for iron ore and coal, and all we can do is try to recoup our costs. Raw materials, fuels and energy make up 70 to 80 percent of the total cost of a ton of steel. But the necessary price hike will not kill the auto industry. I remember very well what happened in 1993, when we fought for price increases, which the auto industry rejected at first. I said to Ferdinand Piëch, the head of VW at the time: You spend more money per car on advertising than you do on steel!

SPIEGEL: Nevertheless, rising energy and raw materials prices affect many companies, as well as consumers. This development is mainly driven by China, which needs more and more coal, ores, oil and steel for its fast-paced growth. Have we entered a new era of international division of labor: the Chinese economy blossoms while the German economy suffers?

ThyssenKrupp at a glance
DER SPIEGEL

ThyssenKrupp at a glance

Schulz: I see things differently. Germany is clearly a winner in globalization, as far as I'm concerned, just as Germany is a winner when it comes to the euro. We are the world's top exporter. Our exports have grown by seven percent each year since 1995, which has helped bring down our unemployment figures considerably. And a number of German companies have even benefited from rising energy and commodity prices. World demand for German machines is growing because they're so efficient. The prospects for the future are also very good, especially when you think of environmental technologies. This is already a huge market today, worth an estimated €1 trillion ($1.6 trillion), and it's expected to double by 2020.

SPIEGEL: We owe it to our strict environmental laws, to some degree, that German companies are now global leaders in environmental protection and renewable energy. Was former Environment Minister Jürgen Trittin, who you criticized heavily in the past, perhaps even a boon to Germany's economic prospects?

Schulz: Well, Mr. Trittin is certainly not my special friend. Because of laws and regulations, the costs of exhaust filters, wastewater treatment, noise protection and other things are, in some cases, twice as high for us in Germany as they are for our European competitors. But as a result we also have the most efficient systems, which are now in demand around the world. So-called green technology is a strongly growing market, offering incredible opportunities for German industry.

SPIEGEL: In the past, heads of major corporations have created the impression that environmental protection drove up their costs. It seemed as if smaller manufacturers of solar power systems, which collected hefty subsidies, were the only ones to benefit from environment regulations.

Schulz: That impression would be wrong. Corporations like ThyssenKrupp or Siemens benefit from the fact that they are now global leaders in many fields. By 2015 the world is expected to have more than 22 megacities, with populations above 10 million. They'll have to invest billions in the energy supply, road construction, public transportation and the water supply. We make special steel for water treatment plants, for efficient power plants, for catalytic converters, to name just a few examples. By the year 2020, environmental technology could replace the automotive sector as the leading industry.

SPIEGEL: Why do you oppose the European Union's plan to reduce carbon dioxide emissions by 20 percent by 2020?

Schulz: First of all, goals must be realistic. Such a substantial reduction in carbon emissions is unrealistic, because technologies like carbon sequestration haven't even been tested yet. Second, the same goals must also apply to all other major emitters, including the United States and China. Otherwise we pay the higher costs and lose our competitiveness, and yet there is no benefit to the climate, because companies that impose a heavier environmental burden will force the more progressive producers out of business.

SPIEGEL: Your Chinese competitors take advantage of lax environment laws. How can a German steel producer even compete?

Schulz: The truth is that the Chinese produce some of their steel in disastrous blast furnaces. For the Olympic Games, 66 steel mills and a total of 267 companies in and around Beijing are being forced to close production. Specific coke consumption is at least 20 percent higher on average than in German blast furnaces. Across the board, they consume an additional 50 million tons because of the inefficient technologies they use. In other words, they discharge an additional 180 million tons of CO2 into the air. It's a filthy business. All those old furnaces ought to be shut down immediately, and that's exactly what the central government in Beijing wants. But the provincial governments won't allow it to happen.

SPIEGEL: Globalization, in this case, benefits those who are especially unscrupulous in their treatment of the environment. Who should change this?

Schulz: That job falls to the makers of foreign and global trade policy. I've already discussed it with the chancellor, and even the G-8 summit has addressed the issue. But that's not enough. This situation cannot be allowed to continue. We must exert pressure on the Chinese.

SPIEGEL: Do you believe that the Chinese will respond to pressure from abroad?

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