ARBED S.A.

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ARBED S.A.

Avenue de la Liberté 19
L-2930
Luxembourg
(352) 47 92-1
Fax: (352) 47 92-26 75

Public Company
Incorporated: 1882 as Socieéteé Anonyme des Hauts Fourneaux et Forges de Dudelange
Employees: 54,000
Sales: LuxFr209.00 billion (US$6.77 billion) Stock Exchanges: Luxembourg Brussels Paris Frankfurt Amsterdam London

ARBED S.A., based in the Grand Duchy of Luxembourg, heads an international group of 430 companies engaged in the integrated production of iron and steel from the mining process to the production of highly sophisticated finished goods. It can be seen as both product and agent of the economic revolution that in approximately the last 100 years has transformed the small agricultural Luxembourg into a major industrial power with its activities centered on the great iron- and steel-producing complexes in the southwest of the country. Three-quarters of the group’s turnover is accounted for by steel production and related activities. ARBED is the Grand Duchy’s largest exporter and industrial employer, and the fifth largest iron- and steel-producing group in Europe, with an annual output of 7-7.5 million tons. It counts among the 13 leading producers in the world’s market-economy countries.

Iron has a long history in the area that now constitutes the Grand Duchy of Luxembourg. It was mined by the Celts, then later by the Romans, not only from alluvial deposits in the valleys of the rivers Eisch and Alzette but also from oolitic ore, found in the southwest of the region— minette, low in iron content and high in phosphorus, whose rediscovery in the mid-19th century gave an impetus to the modern industry and decided its location. Traces have been found in the canton of Esch of underground mining by the Romans, who made charcoal from the wood of local forests to smelt the ore in primitive furnaces, obtaining the metal they then fashioned into arms and armor. After the Germanic invasions the recovery of minette, for which underground mining skills were needed, died out. Iron production based on alluvial ore persisted in the region as a domestic craft, providing household and farm implements during the succeeding centuries as the region slowly and intermittently evolved, despite periods of anarchy, civil war, plague, misrule, and invasion, toward a sense of identity. Smelting plants and forges were set up near sources of charcoal and water power, the first very small-scale blast furnace making its appearance in the region in 1564.

Iron- and steel-making emerged on an industrial scale in the middle of the 19th century, in the region that had been the Grand Duchy since 1815. It is there that the origins of ARBED lie, although the company itself did not come into being until 1911. When the years of adversity came to an end, there were Luxembourgers ready to seize the country’s chance at prosperity—business men with the drive and confidence to adapt Luxembourg’s natural, human, and technological resources to the huge but inconstant market for iron and steel opening up at home and especially abroad, as industrialization gathered pace.

Several circumstances converged to favor an upswing in iron and, increasingly, in steel production: the expanding use of the steam engine which allowed greater freedom in siting and a larger scale of operations; the rediscovery in south Luxembourg of minette deposits that would not be exhausted until 1981; the construction of railway lines linking Luxembourg with the European systems; Luxembourg’s entry in 1842 into the German customs union, the Zollverein; and the invention in 1878 by S.G. Thomas and P. Gilchrist of the Thomas-Gilchrist—or Thomas, or basic Bessemer—process, an improvement of the Bessemer converter, permitting elimination of the phosphorus that had hitherto presented problems in the smelting of the phosphoric minette ores of Luxembourg and Lorraine. When, following lengthy initiatives by Emile Mayrisch and Gaston Barbanson, Aciéries Réunies de Burbach-Eich-Dudelange was formed in 1911, it was on foundations laid earlier by a number of iron and steel manufacturers. The latter were mainly Luxembourgers, linked by several family connections as well as by business interests. They had built up three companies, whose resources were now to be combined and directed to modern large-scale production of steel and steel products centered on Esch-Schifflange.

The first of the three companies, already operating and cooperating in close proximity to each other in the southwest of the Grand Duchy and in nearby Germany and Lorraine, was the Forges d’Eich—Le Gallais, Metz et Cie, founded in 1838. It had originated in 1838 when three brothers, Charles, Norbert, and Auguste Metz, who played major roles in Luxembourg industry, politics, and journalism, set up a limited partnership, Auguste Metz et Cie, known since 1865 as the Socieéteé des Forges d’Eich—Metz et Cie. In 1879 this company had acquired a license to use the Thomas-Gilchrist dephos-phorization process. Its main works were at Dommeldange and Esch-Schifflange, the latter a joint venture started in 1871 by Norbert Metz and Victor Tesch, his cousin by marriage.

The second company, Société Anonyme des Mines du Luxembourg et des Forges de Sarrebruck, had been created in 1856 by Victor Tesch and other Belgians of Luxembourg origin. Its coke ovens and blast furnaces were at Burbach in Germany, northeast of Saarbrücken. The third company, the Socieéteé Anonyme des Hauts Fourneaux et Forges de Dudelange, had been established in 1882 by the first two companies in order to exploit the Thomas-Gilchrist process in a steel plant at Dudelange, where the first charge of Thomas steel was blown in 1886. In 1911 the first two companies were dissolved and their assets transferred to the third, whose title was changed to Acieries Rdunies de Burbach-Eich-Dudelange S.A. (ARBED).

By 1911 the first company’s original Eich works were of minor importance. At Esch-Schifflange it had four blast furnaces, two of them belonging to the Socieéteé des Mines du Luxembourg et de Sarrebruck, and its works at Dommeldange had three blast furnaces and four electric furnaces. The second company’s Burbach plant had eight blast furnaces, a steel works, and rolling mills. The third company’s property at Dudelange comprised six blast furnaces, a steel works, and rolling mills. All three constituent companies also brought with them the iron ore mining concessions they held in Luxembourg and Lorraine. Between them the companies produced cast iron and Thomas steel; laminated items—semi-finished goods; and sections, girders, rails and flat bars. With Emile Mayrisch, managing director from 1897 of the Socieéteé des Mines du Luxembourg et des Forges de Sarrebruck, as overall technical director of ARBED, the new company proceeded rapidly with its plans for modernization, vertical integration, and expansion.

In 1912 ARBED’s annual output of crude steel was 824.5 thousand tons. Old furnaces, blowers, and other installations were being refurbished or replaced, and new, more efficient equipment was being brought in, notably equipment which utilized waste gases from smelting to power other processes further down the line. In 1913 new installations, including three blast furnaces, started up at the company’s Esch-Schifflange and Esch-Belval works.

In April of the same year ARBED protected its coke supplies by forming a contractual association with the Eschweiler collieries—Eschweiler Bergwerks-Verein AG (EBV)—near Aachen, Germany. This move was in keeping with a policy of cooperation with other European firms, designed to ensure ARBED’s supplies of raw materials—ore, coal, and coke—as well as to find customers for its crude, semi-finished, and finished products and to extend its product range. In 1913 ARBED joined with a Belgian cement-making firm to start a new company, later to become the Société Anonyme des Ciments Luxembourgeois, for their mutual advantage; in exchange for a site near the Esch-Schifflange works, together with a supply of slag and electric current, ARBED would receive cement for its own use at a reduced price.

In 1919, together with the French company Schneider et Cie, ARBED took over all the Luxembourgian and Lorraine iron mines, iron and steel works, including Belval, and wiredrawing works that had belonged before the war to the German company Rhein-Elbe Gelsenkirchener Bergwerks A.G., and set up two linked companies, the Société Métallurgique and the Societe Miniere des Terres Rouges, of which the first, the Societe’ Métallurgique des Terres Rouges—at Esch-Belval— was to be absorbed in 1937 by ARBED, who acquired a majority holding in the second, the Socieéteé Miniere des Terres Rouges, in 1954.

ARBED was recovering from the setback to its ambitions suffered during World War I. As so often over the centuries, Luxembourg’s geographical location had placed it between the hammer and the anvil of contending foreign powers. In spite of its neutral status, guaranteed since 1867, it was invaded by German troops as soon as war broke out, and occupied for the duration. The Grand Duchy has historic, linguistic, and commercial affinities with Belgium and France and with Germany, but the German invasion settled the question of where loyalties should lie in 1914. ARBED’s situation was made particularly painful by its ownership of works—Burbach and Hostenbach— in enemy territory. Company policy was to lend as little comfort as possible to the occupying power, while safeguarding as far as possible the survival and future prospects of ARBED and its employees. In the Grand Duchy, after a brief initial shutdown, which the company had offered to prolong if the Luxembourgian government wished, production was resumed by the blast furnaces—four at Dudelange, one at Esch-Schifflange, and one at Dommeldange. Production followed in the steelworks and rolling mills of Dudelange and Esch-Schifflange and in the electric steelworks at Dommeldange. There were shortages of raw materials—fuel, manganese, and lubricants—and of staff, as well as of food. At one point, in 1917, the Germans occupied the factories in an effort to put down a protest strike by hungry workers. The Saar works, Burbach and Hostenbach, were also kept in operation while hostilities lasted, in spite of reduced supplies and the progressive call-up of staff to the German army. Over the war period, in spite of the new installations, ARBED’s total monthly steel output dropped from nearly 87,000 tons in July 1914 to just under 50,000 tons in October 1918.

Undercapacity persisted after the war, with continuing fuel and transport problems, plus commercial difficulties arising from Luxembourg’s economic isolation, which ended in 1922 with the treaty of economic union with Belgium. Long-term plans proceeded, including the linkage of all the plants located at Esch-sur-Alzette into one huge complex served by its own railway, completed in 1927; by gas-pipes; and by electric cables.

In 1920 ARBED set up a company, the Comptoir Métallurgique Luxembourgeois (COLUMETA), to deal with the sales of its wide range of products. This branch of the group’s activities was to flourish and multiply worldwide, with most of the company’s sales directed abroad. In 1976 the name COLUMETA was changed to TradeARBED; this company has foreign subsidiaries in 50 foreign countries and in every continent.

Also in 1920, ARBED acquired holdings in the German firm of Felten & Guilleaume, makers of wires, cables, and electrical apparatus; TAMET (Argentina), which produced metal tubes, frames, and bolts; Paul Wurth (Luxembourg) metal constructions; and the Helchteren-Zolder collieries in Belgium. In 1922 it bought a holding in the Belgian nail-making and wire-drawing Clouterie et Trefilerie des Flandres.

After the death in a motor accident of Emile Mayrisch in 1928, the inter-war technical development of the group’s mines and factories was led by Aloyse Meyer. The iron mines in Luxembourg and Lorraine were mechanized and modernized. At the steel works, major additions and improvements were made to installations and processes, with constant adjustments to methods of reducing impurities that were present in the ores or were introduced at the manufacturing stage. Production rose steeply, with peaks in 1929 and 1937. Meanwhile the company continued to provide for the welfare of its employees as it had from the beginning, through its own social services—including training, insurance, pensions, bonuses, and help with housing. Responsibility for some of these services has, of course, been taken over gradually by the state, pensions, for example, in 1931, and family allowances in 1947.

In World War II, the Grand Duchy was occupied again, first by German troops, then from August 1940 to September 1944 by Nazi officials. Based on its World War I experience, ARBED had earlier moved out key officials and documents to places of safety, and had obtained legal powers to arrange for its operations to be directed from abroad. Once more production was prudently maintained, at a reduced level, by those who had to stay, working in the face of prolonged hardships and shortages. Output, diminished drastically during the war, ceased entirely for 11 months after the occupation and recovered only slowly from the fuel shortage and transport difficulties that were part of the aftermath of conflict. It was not until 1951 that ARBED reached full capacity once more and achieved production figures—nearly two million tons—that were higher that those of the previous peak years 1929 and 1937.

In the 1950s and 1960s ARBED continued its policy of development and integration within the group. The group expanded through acquisitions and participations at home and abroad—in Europe and South America—aimed at securing its supplies and diversifying its steel production. It continued moving downstream in advance of some of its larger and better-known European competitors.

In 1953 it absorbed the Clouterie et Trefilerie des Flandres and in the following year acquired a majority holding in the Societe Miniere des Terres Rouges. In 1962 it was a major participant in the setting-up of the Siderurgie Maritime company (SIDMAR) to construct an important complex, with integrated steelworks and marine terminal, on the Belgian coast.

In 1965 ARBED acquired a major holding in the Société Anonyme des Hauts Fourneaux et Aciéries de Differdange-St. Ingbert-Rumelange (HADIR), a consortium of Luxembourgian, French, and Belgian companies that had been developing since 1896. The consortium was absorbed completely by ARBED in 1967. HADIR’s Differdange works augmented ARBED’s Esch complex. In 1911 Differdange had begun to roll Grey beams. In 1959 ARBED’s Dudelange works had started producing steel using the LD-AC (Linz-Donavitz-ARBED-Centre) process. ARBED’s wire-works were grouped in 1968 to form a new company, ARBED-Felten & Guilleaume Tréfileries Réunies, which, with other later wiremaking acquisitions, was to become TrefilARBED in 1974. The 1970s saw the extension of ARBED’s activities in several other directions: refractory products; reinforcing wires for car tires; mining operations in Brazil, the United States, and Korea; and mechanical engineering and steel construction. At the end of the 1970s ARBED accounted for a quarter of the Grand Duchy’s gross national product. Two important structural measures taken in advance of the world steel crisis of the mid-1970s and 1980s were the establishment of the ARBED Research Centre in 1971 and of ARBED Finance S.A. in 1972, a holding company designed to provide finance for the group. The acronym ARBED S.A. was adopted in 1978 as the company’s official name.

In 1975 the Luxembourgian economy went into a long recession caused by many factors: the continuing effects of the 1973 world oil crisis; strengthening foreign competition; inflation; rising wages; fluctuating foreign currencies; and depletion of the country’s iron ore. ARBED’s crisis lasted until 1984, and ever since then ARBED, like all other European steelmakers, has had to take account of falling demand for steel, increasing use of plastics, growing competition from the developing world, uncertainties about the new eastern European markets, and currency fluctuations.

In the 1970s and 1980s overcapacity and financial losses called for vigorous adaptation—organizational, financial, and technological. Competitiveness had to be improved. Over the crisis period ARBED economized by reducing its debts, increasing its share capital, and shedding, without sackings, more than half of its work force, some being redeployed in new industries, others taking the early retirement, at 57 years of age, imposed on steel workers by the government in 1980.

The company pursued a policy of rationalization. In 1984 the blast furnaces, the steelmaking facilities, and the hot rolling mill at Dudelange closed down. At the same time ARBED needed to invest in new equipment and implement the results of technological research. In 1980 the first continuous caster was commissioned at Esch-Schifflange, and in 1981 the first continuous annealing line went into service at SIDMAR’s plant in Ghent.

For a time ARBED was helped by the European Economic Community steel quota system. The Luxembourg government provided some financial support on the restricted scale possible for a small country. When by 1983 ARBED could see the tide beginning to turn again, it was largely the result of the group’s own efforts under the chairmanship of Emmanuel Tesch—a descendant of Victor Tesch, one of ARBED’s founders. By the end of its boom year, 1989, helped by the peak in the post-crisis upturn of the European steel market, ARBED was able to pay its shareholders their first dividend since 1975.

In the first years of the 1980s the Luxembourgian steel industry had moved back to closer cooperation with Belgium. In 1987 ARBED acquired a 3% share in the Soci6te* Generate de Belgique. This holding company holds 25% of ARBED’s shares while the government of Luxembourg holds 32%.

In 1983 ARBED began to detach itself from its group holdings in German steel companies. In 1988 it ended a 75-year association with its traditional supplier of metallurgical coke when Eschweiler Bergwerks-Verein (EBV) joined Ruhrkohle AG. Ruhrkohle, however, is contracted to provide the same service until the beginning of the next century.

In the boom year 1989, ARBED decided to double the capacities of the steel processing works at Galvalange, which produces goods for the construction industry—roofing, flashing, fencing—and for the car and goods vehicle industryexhaust parts, cabs and trailers—as well as garden tools and parts for domestic appliances such as microwave ovens, refrigerators, and air-conditioners. In 1990, acting with the Japanese firm Furukawa Electric, ARBED acquired Yates Circuit Foil (USA), which specializes in copper foil and electronic circuits.

Negotiations began in the summer of 1990 between ARBED and the large Belgian steel producer, Cockerill Sambre, for a partial merger that would pool most of the flat steel-making capacity of Cockerill Sambre’s two plants in Wallonia and of ARBED’s Sidmar subsidiary in Flanders. The plan fell through at the end of the year, partly because of regional differences between Flanders and Wallonia over possible closures. However, other cooperative plans aimed at economies of scale and reduction of market overlap are under consideration.

The parent company ARBED S.A.’s main divisions are the works at Esch-Belval, Esch-Schifflange, Differdange, and Dudelange, all in the southwest of the Grand Duchy, not far from ARBED’s head offices in Luxembourg city and served by the ARBED Research Centre at Esch-sur-Alzette. Esch-Belval, employing 3,800 people, is the sole ironmaking center for Luxembourg’s steel industry, and its two blast furnaces supply the hot-metal requirements of ARBED S.A.’s three steelworks, Esch-Schifflange, Esch-Belval, and Differdange. Since 1981, when the grand duchy’s own minette mines became exhausted, Esch-Belval’s siliceous and calcareous minette ores have come from ARBED’s French mines division. In addition to its blast furnaces, producing 8,000 tons of iron and 4,000 tons of slag daily, Esch-Belval has a power station, steelworks, and rolling mills that include two blooming mills, a billet mill, and four finishing trains.

Esch-Schifflange, with 1,600 employees, and with steel works whose two 95 ton converters use the LBE top-blowing oxygen process, continuous casting machines, and rolling mills, specializes in high-quality wire rod and merchant bars. Differdange, with 2,400 employees, and with LDAC/LBE steelworks, rolling mills, a Grey mill, and a tube mill, specializes in producing large and tailor-made Grey beams as well as sheet piles and tubes. At Dudelange, with a work force of 700, the installations comprise a new CVC cold-rolling mill that processes coils supplied by the Belgian group Cockerill Sambre and by Sidmar, plus a slitting unit, a galvanizing unit, and a foundry producing ingot moulds.

Principal Subsidiaries

Metallurgique et Miniere de Rodange-Athus S.A. (MMRA) (45%); SIDMAR S.A. (Belgium, 51%); ALZ N.V. (Belgium, 75%); Companhia Siderúrgica Belgo-Mineira S.A. (Brazil, 20.2%); TradeARBED Luxembourg S.A.; TradeARBED Participations S.a r.l.; Trefil-ARBED S.A.; Hein, Lehmann AG (Germany); Paul Wurth S.A. (47.87%); MecanARBED Dommeldange, S.a r.l.; Galvalange S.a r.l. (50%); ESP (Belgium, 99.99%); COGI-FER A.A. (France, 35.27%); Ciments Luxembourgeois S.A. (50.49%).