After moving to the next phase in its strategy in September 2007, Outokumpu launched an investment program totaling some EUR 2 billion. In October 2008, as a result of the global financial crisis and a sudden weakening in stainless steel demand, Outokumpu decided to review the program.
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In December, a decision was made to postpone the investment program almost entirely for at least 12 months. Continuing any of the projects would be subject to a separate decision based on an updated feasibility study.
Investments worth some EUR 1.5 billion were postponed and capital expenditure in 2009 is expected to total some EUR 300 million (the original plans EUR 850 million). Most spending in 2009 will be related to expansion projects that are close to being finalized and some mandatory components in started projects. EUR 100 million of the Group's capital expenditure in 2009 is maintenance related. |
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The investments in high-purity ferritic and bright-annealing in Tornio, Finland, special grades in Avesta, Sweden and quarto plate in Degerfors, Sweden have been postponed. The investment to expand quarto plate production capacity at New Castle (in), in the US, will proceed according to plan. Synergy benefits resulting from the acquisition of the SoGePar Group, an Italian independent distributor, allowed the investment program in service centers in Europe to be streamlined and optimized. Only the investment in the service center in Willich, Germany, will proceed as planned. All other service center investments in Europe (Poland, France and southern Germany) have either been reduced in scope or postponed. The service center investment in India has also been postponed. The plate service center in China will however proceed as planned. The investment in doubling ferrochrome production capacity at Tornio has also been postponed for at least 12 months.
The EUR 90 million investment project, announced on February 1, 2007, to replace the No. 2 annealing and pickling line in Tornio has been completed. The old line was decommissioned in September. Ramp-up of the new line started in December and full production capacity will be available by the end of 2009. The shutdown and ramp-up of production will not have a significant impact on the total capacity of the cold rolling plant in 2008 or 2009. The new annealing and pickling line has an annual capacity of 300 000 tons and is capable of producing both austenitic and ferritic products with minimum set-up times.
In February, Outokumpu OSTP and the Saudi Arabian tube manufacturer Armetal, a company in the Al-Hejailan Group, agreed to form Outokumpu Armetal Stainless Pipe Co., Ltd., a 51/49 stainless steel tubular joint venture located in Riyadh. The joint venture began operating on October 1, 2008. In June, Outokumpu announced an investment of some 10 million in Long Products' finishing facilities in Sheffield in the UK. The new equipment is scheduled to be operational in mid 2009. This investment is creating an integrated manufacturing route for small bar and rebar, complementing the existing melt shop and wire rod mill, located in Sheffield.