Comings and Goings

On May 24, 2008 tyre industry steel cord producer Bekaert and China’s Anshan Iron and Steel Group Corporation (Ansteel), one of the world’s leading steel producers, signed a memorandum of understanding outlining the terms of a close future partnership between the two companies. As part of the arrangement both firms agreed to explore strategic cooperation projects in order to better address the growing demand for advanced wire products on the Chinese market.

“We have had an outstanding relationship with Bekaert for many years,” said Ansteel chairman and CEO Mr. Zhang Xiogang. “Now, we want to expand that relationship into a strong partnership with a world leader in advanced wire products. Bringing together the operational excellence, leadership position and common interests of both companies, we believe this partnership shall support the further development and sustainability of China’s industrial growth.” Bekaert CEO Mr. Bert De Greve added that “Bekaert is fully committed to the industrial development of China…Mr. Zhang and myself share the willingness to build a solid strategic partnership.”

The memorandum of understanding is already beginning to bear fruit. On June 6 both companies announced their joint plans to build a facility in Chongqing, Shuangqiao District, a decision they called a “first step in the realisation of the strategic partnership.” The terms of the contract, officially inked on July 16, see Bekaert and Ansteel together investing a total 150 million euros into a 50/50 joint venture facility called the Angang Bekaert Tire Cord Co. The project’s first phase to be built with an investment of 40 million euros, is expected to start production in the first half of 2009. The joint venture factory will have an annual capacity of 100,000 tonnes and an output value of CNY 2 billion (£181.8 million).

According to Mr. Chen Ming, director of Ansteel’s Strategic Development Department, this joint venture is an important step in the company’s strategic downstream integration plans, as it will open up new markets for Ansteel through its partnership with Bekaert. Mr. Geert Roelens, Bekaert group executive vice president, added “with Ansteel being our partner in wire rod development and supply, as well as an industry leader with great knowledge of the local market, we are confident that this first tangible realisation of our partnership agreement will be the start of an extensive and fruitful cooperation.”

New opportunities in one part of the world have been mirrored by a reduction of activities in another, however. On June 26 Bekaert management gave its Belgian works councils notification of plans to reorganise its steel cord activities within the country. This reorganisation includes the closure of its Lanklaar production facility at integration of its Waregem production entity into other group plants. The closure of the plant in Lanklaar affects 136 jobs, stated Bekaert, while the transfer of activities from Waregem will not bring about any redundancies. As a result of this reorganisation, Bekaert’s Belgian steel cord activities will be largely concentrated in Aalter, a facility the company says will continue to specialise to an even greater extent in the production and development of advanced steel cord products.

The reason behind the closure and other reorganisation activities, says Bekaert, can be found in the recent structural changes in the steel cord market, changes that have an immediate impact on the company. Bekaert notes, for instance, that its customers – specifically tyre manufacturers – are continuing to transfer their production activities from Western to Central Europe. Competitors in the production of steel cord are also building up their presence and position in Central Europe. Increasingly, therefore, customers are looking to locally based suppliers who can supply them at lower cost so they can be competitive in these growth markets. In short, Bekaert says it is facing sustained pressure on selling prices for steel cord products in Europe.

If Bekaert is to retain its competitiveness as a group in the long run, it says it is vital for the company to reorganise its steel cord production in Western Europe, which is heavily concentrated in Belgium. The manufacturer comments that difficult market conditions have particularly affected the plant in Lanklaar, which is largely engaged in the production of semi-finished products for Bekaert’s tyre cord manufacturing platform in Central Europe.

“We acknowledge that this will be very painful for those concerned but market conditions force us to take action now, so that we can establish a more robust basis for a sustainable future for the Bekaert group,” said Patrick De Keyzer, general manager Steelcord Technology & Operations Europe & Turkey. “We shall be entering into a dialogue with the employee organisations as soon as possible.” Company employees reacted to the announcement of a reorganisation with a 24-hour strike in early July, in which some 2,000 workers walked off the job.

The woven product activities previously performed in Waregem are being transferred to the Bekaert facility in Zwevegem. The fine cord activities with high added value from Waregem are being integrated into the plant in Aalter. Bekaert says that affected employees will be offered jobs in nearby plants. Partly as a result of the integration of the products from Waregem, the Aalter plant will specialise to an even greater extent in the production of advanced steel cord products and will continue to function as the technological platform for the European steel cord activities, acting in close cooperation with the company’s technology centre in Deerlijk.