GERMANY'S BEST PRACTICES FOR ENHANCING STEEL

UNCLAS BERLIN 000218

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD OTRA FR GR IT JA KSAC EUN
SUBJECT: GERMANY'S BEST PRACTICES FOR ENHANCING STEEL
INDUSTRY

REF: SECSTATE 202497

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.


1. (SBU) Summary: Germany's steel industry benefits from both
national and EU programs to enhance the competitiveness of
its steel industry. According to Dr. Dirk Grabowski, Office
Director for the Steel and Defense Industries at the Ministry
of Economics and Technology, the nation's steel industry
receives funding from both European Union and national
government initiatives designed to enhance its
competitiveness through innovation and research support. In
2006, Germany's leading steel producer Thyssen-Krupp enjoyed
its best annual performance since its merger five years ago.
Grabowski emphasized Germany's desire to enlarge the industry
but not through subsidies, pointing to reacquiring segments
of the raw material supply chain. He noted that globalization
had brought new entrants from Russia and Italy and spurred
Thyssen-Krupp's plans to open a $3 billion steel mill in U.S.
End Summary.

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Innovation Funds
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2. (U) The Research Fund for Coal and Steel (RFCS),a vestige
of the European Coal and Steel Community, continues to
provide 60 million Euros in annual funding for training,
research and restructuring. The European Commission's
Directorate-General for Research Unit 5 administers these
funds. The Council directs about three-quarters of the funds
to the steel industry EU-wide. During the 1980s, when the
steel sector faced overcapacity, the program provided Member
States with assistance to downsize their steel industries.
The program is now a source of funding for steel research
programs, which lead to economic, clean and safe steel
products through improved production and finishing, new steel
grades for more rigorous applications, enhanced mechanical
properties and greater resistance to heat and corrosion. The
program also aims to reduce carbon dioxide and GHG emissions
through carbon-lean technologies combined with carbon dioxide
capture and sequestration, and the innovative use of natural
gas and bydrogen, biomass or electricity in the production of
steel. Among the benefits of this research are lower energy
consumption, greater environmental protection and
conservation, greater structural safety in case of
earthquakes or fire and easier material recovery and
recycling. The EU Commission credits the program with
assisting the steel industry to better meet the challenges of
international competition, accelerated innovation, stricter
environmental protection and energy consumption standards.


3. (U) On the national level, the GOG's multi-billion dollar
High Tech Strategy will devote resources toward innovation in
the steel and related industries between now and 2010.
Coordinated by the federal ministries for Education and
Research, and Economics and Technology, the strategy
identifies 17 cutting-edge fields, including materials and
production technologies as well as the automotive, aviation
and transportation sectors. The strategy sets aside 6 billion
Euros specifically for research, development and innovation.
Within this larger program, the German goverment allocates
300 million euros annually on initiatives to improve energy
efficiency in the production of metals, including steel.
Despite a decades-long decline in the per-unit electricity
needed to produce steel, Germany's industry continues to seek
cost reductions and faces pressure to reduce energy
consumption.

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Research Support
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5. (U) As part of the High Tech Strategy, Germany plans to
build on its existing solid infrastructure in university and
non-university institutes in materials science, which supply
qualified professionals to the steel industry. Beginning this
year, the GOG will fund young teams of researchers working in
the engineering sciences at universities of applied sciences.
The Ministry of Economics and Technology specifically
identified teaching positions to be added as well as a new
Innovative Steel research chair, Georg Frommeyer, at the Max
Planck Institute for Iron Research in Dusseldorf.


6. (U) Dating back to 1971, the Planck Institute has
contributed significantly to advances in Germany's steel
industry. The institute, which receives roughly half of its
funding from industry, is located near the traditional
industrial belt. Frommeyer's Department of Materials
Technology develops high performance steels with superior

physical and mechnical properties such as lower density,
higher elastic stiffness, excellent formability and improved
corrosion resistance. More specifically, Frommeyer's
department designs and evaluates high-strength steels with
the capacity to endure -50 to 100 degree Celsius environments
as required for modern railway transportation systems and
power trains.

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Investment in U.S.
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7. (SBU) In discussing Germany's steel industry, Grabowski
said Thyssen- Krupp expects to open a $3 billion USD steel
mill in the southern United States, either in Arkansas or
Louisiana. Grabowski also thought the U.S. and Germany could
find areas of cooperation, particularly on the
energy/environment front. One possible area would be in near
zero-emissions steel plants.
TIMKEN JR