Voestalpine looks to speciality steels, outside Europe

NEW DELHI Oct 10 (Reuters) - Austria's Voestalpine plans to cut its exposure to commoditised steelmaking and tough European markets by focusing investment on emerging markets and higher-margin specialist products used in tools, turbines and cars.

The company expects the contribution to group sales from its traditional steelmaking business to fall to 25 percent over 5-8 years, from a third now, Chief Executive Wolfgang Eder said on the sidelines of a World Steel Association conference.

It also plans to invest around 6-7 billion euros by 2020, mostly outside Europe.

"Voestalpine will not make any major investments in Europe in the next few years. On the contrary, we want to optimise what we have," Eder told Reuters.

"We will focus even more on our downstream activities."

Voestalpine gets two-thirds of its sales and 80 percent of profits from premium or niche products that allow it to escape much of the volatility in more commoditised steel markets.

Record sales of specialist steel products used by fast-growing emerging countries has also helped it to evade the price wars and overcapacity afflicting the steel industry in Europe.

The company is now following its core customers in the automotive sector, which are increasingly moving production to markets in China, Asia, and South America, Eder said.

As a result, it is building plants in China, the United States and Brazil.

"We are focusing on growth markets. Currently, we do 30 percent of sales outside Europe. In five years time, it should be 40 percent, and by 2020 roughly half," Eder said.

Eder, who is also president of European steel association Eurofer, said he doesn't expect any signs of an upturn in the region's steel market before mid-2013, and a return to pre-2008 growth levels was still five to six years away.

"Today there is 210 million tonnes of capacity in Europe, but realistic demand is only 150 to 160 million tonnes. We will see further shutdowns, restructurings," he predicted.

Earlier this month, ArcelorMittal, the world's No.1 steelmaker, said it would permanently close two furnaces in France.

Voestalpine cut steel capacity by a tenth late last year as consumers bought fewer items such as fridges and washing machines and the construction industry remained weak. But sentiment has improved this year and it has run at full steel capacity again since January. (Reporting by Prashant Mehra; Editing by Mark Potter)