Europe is set to get a new steel giant after two of the industry’s biggest players agreed to team up.
Germany’s Thyssenkrupp (TKAMY) and India’s Tata Steel announced plans to merge their European operations on Wednesday to create a new force in an industry that is under intense pressure from cheap Chinese exports.
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Thyssenkrupp and Tata said their planned joint venture will be Europe’s second-largest steel producer with annual revenues of almost $18 billion. It will be headquartered in Amsterdam with more than 40,000 employees.
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But with the steel industry still struggling with too much production capacity and not enough demand, layoffs are expected.
“Even with the joint venture it will not be possible to avoid job cuts,” Thyssenkrupp CEO Heinrich Hiesinger said in a statement, adding that as many as 4,000 jobs are likely to be axed in the coming years.
He said the cuts will be distributed “roughly evenly” between his company and Tata, while suggesting that the jobs would end up being slashed even without the merger.
“No measures will be taken that would not also have had to be implemented by the company on its own,” Hiesinger said.
Related: The prices of these vital metals are soaring
The companies said they plan to sign a formal agreement early next year and close the deal by the end of 2018.
Tata Steel, a subsidiary of one of India’s biggest industrial groups, has faced numerous issues with its European steel business.
The company announced plans to offload its U.K. operations last year, blaming cheap Chinese steel imports for plummeting prices. But it later put those plans on hold.
CNNMoney (New Delhi) First published September 20, 2017: 4:15 AM ET