ThyssenKrupp shuns stainless tie-ups, delays plant

DUESSELDORF, Germany (Reuters) - ThyssenKrupp AG (TKAG.DE), Germany's largest steelmaker, scaled back plans for new mills in Brazil and the United States but committed itself to its money-losing stainless steel business.

Struggling to retain its investment-grade debt rating, the company said on Friday cooperation options it had mooted for its stainless operations would not create value for investors and it would develop the business on a stand-alone basis.

ThyssenKrupp, which holds talks this month with rating agencies in the hope of avoiding a downgrade to "junk" status, said its supervisory board approved reducing capital spending by over 1.3 billion euros ($1.9 billion) in the year to September 2009.

Net debt at the end of this month was now estimated to be below 3.5 billion euros. As of June 30, it had stood at 3.1 billion, up from 1.6 billion as of September last year.

It said it would address debt by cutting back or postponing projects, including a 4.5 billion euro carbon steel plant in Brazil and carbon steel and stainless steel plants in Alabama for which it had earmarked 3.1 billion euros.

With carmakers, shipbuilders and engineering groups slashing steel demand dramatically, ThyssenKrupp last month warned it expects a loss this year in the "high three-digit million euros" range.

It has already set out plans for more than 1 billion euros in cost cuts and has revamped its structure to reduce its five divisions into two and cut 2,000 jobs at its steel division.

EFFICIENCY DRIVE

ThyssenKrupp also on Friday unveiled a new ramp-up schedule of its existing carbon steel plant in Brazil, which is supposed to produce 5 million tonnes of slabs per year.

The first production line will start operation in mid-2010 with one blast furnace and one steelmaking converter, it said. A second blast furnace and converter is projected to go into operation there in 2011.

A stainless steel plant in Alabama will start production at its cold rolling mill in the second half of 2010, initially with a reduced capacity of around 100,000 tonnes per year.

The original plan was to start with a cold-rolled capacity of around 350,000 tonnes per year.

The meltshop of the Alabama stainless steel mill could be delayed by up to 24 months until fiscal 2013/2014, it said.

"This means that the scale of the overall (Alabama stainless steel) project will be retained, as we continue to believe that after economic recovery in the USA, the NAFTA market offers promising opportunities for the market and technology leader in the stainless steel sector," it said.

With the group's debt ratings a notch above junk, ratings agencies are closely watching its expansion plans.

Fitch has a BBB- rating and Moody's a Baa3. Standard & Poor's in June cut its rating to BBB-, warning another downgrade could follow if it saw no meaningful debt reduction plan.

The company said the latest restructuring and cost-cutting measures would improve the group's cost base by 1 billion euros from fiscal 2010/2011.

ThyssenKrupp shares closed down 0.3 percent at 22.92 euros, lagging a 1.6 percent gain in Germany's blue-chip DAX index .GDAXI.

(Editing by David Holmes)

($1=.7008 Euro)