Koninklijke Nederlandsche Hoogovens en Staalfabrieken NV

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Koninklijke Nederlandsche Hoogovens en Staalfabrieken NV

Post Office Box 10000
1970 CA IJmuiden
The Netherlands
(2550) 02514-96644
Fax: 2514 70000

Public Company
Incorporated: 1918
Employees: 27,000
Sales: Dfl 18.17 billion (US$10.78 billion)
Stock Exchange: Amsterdam

Koninklijke Nederlandsche Hoogovens en Staalfabrieken NV (Hoogovens) first came into existence just after World War I and has gradually developed into a business specializing in steel and aluminum raw materials and products. As part of the trend in the Netherlands towards self-sufficiency in vitally important products, the idea proposed by a group of prominent manufacturers, led by H.J.E. Wenckebach from 1918 to 1924, took increasingly firm hold. They set out to establish a fully integrated national iron and steel industry capable of converting pig-iron into steel products and semi-finished products. It was Wenckebach’s vision, reinforced by his wide business experience, that sustained the project.

With the support of major industrialists such as the brothers, Stork, owners of a machine factory; J. Muysken, transport; H. Colijn, Royal Dutch/Shell; F.H. Fentener van Vlissingen, Steenkolen Handelsvereniging (SHV); and A.F. Philips, in the incandescent lamps industry, a large part of the capital needed was acquired by subscription. The national interest and considerations of business prestige marked the nexus of personal relations between government officials and financiers. Without the contribution of Dfl 7.5 million from the Dutch state and of Dfl 5 million from the municipality of Amsterdam, the Dfl 30 million required could not have been raised. Participation by the state proved to be of crucial importance in enabling the company to stand up to the powerful competition in Europe. The execution of the major project, a blast furnace, steel, and rolling-mill works, was spread over a lengthy period because of the rapidly rising costs. Not until 1953 was it put into full effect.

Besides financing, finding a suitable location was a significant strategic problem. The choice fell on the city of IJmuiden, owing to its favorable seaboard location, symbolized in the emblem of the enterprise, the starfish. In the Netherlands, poor in raw materials, a ready supply of imported iron ore and pit-coal was of vital importance, as was the possibility of easy export. Other locations—near Rotterdam and Moerdijk—were ruled out because of the poor structure of the local soil. However, the construction of the first blast furnaces still had to wait.

The first step was taken in 1918 in collaboration with the steel manufacturing firm of Demka at Utrecht. In 1920 a contract was concluded with the German steel business of Phoenix in Dortmund, enabling Hoogovens to convert its own pig iron into steel products at another factory. At this stage, Hoogovens was to confine itself to building two blast furnaces. A minority interest in Phoenix ensured a permanent place for Hoogovens within the European steel industry. This interest ran counter to the original plan for an independent basic industry, a conflict mitigated, however, by the resulting transfer of expertise. This dichotomy was to be Hoogovens’s persisting paradox.

The production of pig iron in the first furnace began on January 24, 1924, under the control of the technical manager, A.H. Ingen Housz. The director from 1920 to 1945, G.A. Kessler, was faced with the task of placing the business on a sound economic footing. Hoogovens secured a foothold in the pig-iron export market by maintaining direct contact with its customers. It could deliver a high-quality product at a low price. On the domestic market, growth in turnover was explosive. The volume of business rose from a quarter of the domestic pig iron market in the first year of production to three-quarters in 1934.

Production costs were kept under control by the utilization of various by-products. In 1928, the fertilizer factory, Mekog, was launched, in conjunction with Royal Dutch/Shell, for the consumption of coking-oven gas. In 1930 the cement factory, Cemij, a subsidiary enterprise, was formed in collaboration with ENCI, to produce blast furnace sealants. By this means a competitive war between the Dutch cement producers Hoogovens and ENCI was prevented, and independence from foreign competition achieved. Compared with pig iron turnover, sales of by-products were stable, and were sufficient to cover Hoogovens’s fixed expenses.

To strengthen Hoogovens’s position on the domestic market, a steel study center was set up, in cooperation with the Dutch authorities, which resulted in a steel plan. The steel plan had become necessary in view of the recession affecting—in the first instance—participation in the Vereinigte Stahlwerke (German Consolidated Steelworks). Demand for pig iron declined. Meanwhile, from 1936 onward, demand for raw steel and steel semi-finished products was very much on the increase, making it feasible to start building a steel factory. In 1939 steel production began at the Siemens-Martin factory. The age of iron was over. Consequently, the twin-headed directorate was expanded to include a doctor of economics, M.W. Holtrop, later to become director of De Nederlandse Bank. In 1940 the turnover of pig iron amounted to Dfl 10.2 million, of by-products Dfl 3.1 million, of steel Dfl 7.1 million, and of tubing Dfl 1 million.

A dividend was paid to shareholders for the first time in 1939. The large scale of investments, along with the devaluation of the monetary value of the part-holding in Vereinigte Stahlwerke necessitated a strict internal policy regarding costs. Thanks to considerable credits from the Nederlandse Handel Maatschappij (Dutch Trading Company) and Royal Dutch/ Shell, the crisis of the 1930s was surmounted. Yet up to 1940 Hoogovens was still no more than a moderate-sized enterprise compared to the steel giants of Europe.

During World War II, more than 50% of Hoogovens’s shares were assigned to an Office of Administration in order to enable Hoogovens as a group of interested parties to resist excessive German infiltration. It worked. During the war, Hoogovens took over B. Van Leer’s roller business. Until then Hoogovens had had its semi-finished products made in the rolling-mills of Demka and Van Leer.

Social responsibilities were a primary concern for Hoogovens’s board, and a social department was established. After a difficult start, accompanied by strikes, good labor relations were important to the employers’ association. There was no strict hierarchy. The cooperation of a flexible, informed, and dedicated work force determined the free and easy organizational structure. Team spirit was reinforced by the technical character of the business and the hard physical work. Staff associations were encouraged and training, both general and technical, was carried out within the factory. In 1926 a social fund, the Wenckebach Fund, was created for the benefit of the staff. Pension funds followed, in 1929 for executives, and in 1938 for the work force.

Foremost during the early postwar years was the Breedband project, which included the construction of a hot strip mill, cold band, and tinning installations. The tinplate surface inspectors in the tinning mills were the first women production assistants in a traditionally men’s occupation. The Breedband rolling-mills were financed by a contribution of Dfl 150 million from the state, within the framework of its industrial policy, Dfl 23.5 million of which came from Marshall Plan aid. The subsidiary, set up in 1950 as Breedband NV, in which Hoogovens itself invested Dfl 60 million, was fully incorporated in the blast furnace business in 1964 when Hoogovens purchased the state’s shares. To put into effect the integration of furnaces, steel factory, and rolling-mills, management was from the outset in the hands of Hoogovens. During this period engineer Ingen Housz was in charge.

Hoogovens’s share of output in the European Coal and Steel Community rose from 1.1% in 1952 to 3.4% in 1967. New production methods followed in rapid succession. In 1958 the oxysteel factory went into production. The process entailed blowing oxygen into liquid pig iron, by which process the carbon was burned off and steel obtained. From the beginning in 1924 it had been necessary to operate, whatever the state of the market, in a factory in a constant state of reconstruction; technical innovation was of crucial importance. In 1980 the continuous casting machine was introduced, realizing a continuous output of steel for slabs.

Hoogovens has been managed since 1961 by a five-member directorate. The directorate, known since 1965 as the board of directors, had proceeded on the policy of previous directors. Company programs included profit-sharing for personnel, 1949, the introduction of an industrial council, 1957, uniform conditions of labor for workers and salaried staff, 1966, and a comprehensive program of training, accommodation, and recreation. As a rule, half the personnel had been involved in in-house training schemes. Without well-trained steel workers, Hoogovens could not have kept pace with technological developments.

By 1971 Hoogovens’s activities were no longer restricted to steel production. The Hoogovens concern had established its present structure with the acquisition of subsidiaries in the aluminum, oil and gas, and coal sectors. In 1966 the board voted in favor of collaborating with the German steel firm of Hoesch in Dortmund, in the belief that this cooperation would take the companies into joint position among the top ten steel enterprises in Europe. Hoogovens had a 15% share in Hoesch. According to the chairman of the board of directors, P.L. Just-man Jacob, this collaboration was a good thing for Hoogovens. All the same, mergers across the frontiers struck him, in 1968, as “damned difficult.” In 1972 Hoogovens IJ muiden and Hoesch Dortmund, the main industrial plants of the respective companies, amalgamated to form the steel firm of Estel, taking them to fourth place in Europe. Yet only 25% of turnover was achieved on the domestic market. The shipment of raw materials and products to and from its own port, the largest in the Netherlands after Rotterdam and Amsterdam, made Hoogovens a desirable partner in a merger.

After the worldwide economic crisis of 1973 came the 1975 European steel crisis. Schemes for curbing the overproduction of steel in Europe made it essential that Hoogovens keep abreast of technology. Only modern businesses that could provide a high quality product at a low price would survive. The much criticized Maasvlakte project—involving the establishment of a second blast furnace concern in Rotterdam—was then abandoned. By May 25, 1983, Hoogovens had produced 100 million tons of steel since 1939. The one million frontier had been crossed in 1958.

After seven years of crisis in the steel industry and handicapped by governmental financial support given to its European competitors, Estel was no longer strong enough financially to carry out independently a restructuring of—in particular— the steel business in Dortmund. Among the last steel enterprises in the European Economic Community (EEC) to ask for assistance from a government, Estel requested help from the German and Dutch authorities. The conditions laid down by the German authorities meant that the merger between Hoesch Dortmund and Hoogovens would have to be terminated. What Justman Jacob had anticipated in 1968 came to pass. The crisis in steel and the government subsidies of other European steelworks, as well as differences in national industrial policies, made a binational undertaking unworkable.

In 1981 the European Commission ruled that any offer of support must be dependent on a commitment to reduction in capacity and a program of restructuring. This would result in a recovery of earning power. Production and pricing agreements, imposed by Brussels, have controlled the European steel industry since 1980. Through the closure of Demka and curtailment of hot strip mill production, Hoogovens contributed more than its share towards putting the EEC steel industry on a sound footing. As a result, in 1982 Hoogovens developed a strategy for the years 1982 to 1985.

The strategy was then focused on diversifying activities in steel manufacture, maintaining low price levels, and raising productivity. An extensive investment program, centered on the steel business, was intended to be one-third financed by the Dutch government. The viability of the Hoogovens business was evident from the fact that other European steel concerns received considerably greater government support. Again, the company had no trouble obtaining money from the capital market, owing to the soundness of its planning and support from the Dutch government.

Over the period 1974 to 1985, as one of the few large integrated steel businesses in the EEC, Hoogovens was able to limit cuts in staffing to 22%. This took place without forced dismissals, through natural attrition and retraining. The industrial council had from the start opposed any loss of jobs. The management made it a point of policy. Hoogovens’s commitment to reducing job cuts, as far as possible, corresponded to the government’s wishes. The state with 14% and the city of Amsterdam with 6% had initially owned a fifth of Hoogovens’s shares.

After 1984 the state of the steel market improved, enabling Hoogovens as one of the primary European steel concerns to become profitable again. Hoogovens diversified in an attempt to become less dependent on the cyclical movement in steel. The aluminum division was expanded substantially in 1987 by the takeover of several German firms. All the same, Hoogovens remained a medium-sized business in which 4.5% of EEC steel production was concentrated. Liberalizing of the steel market could lead to a rise in production for export-oriented business.

In the early 1990s Hoogovens’s aim had been to concentrate on its core activities, steel and aluminum, at expense of secondary activities. In 1988 the Noordwinning Group, in natural gas, and in 1989 the cement factory and the cable factory were sold off. As a result, Hoogovens became a two-metal concern, with the aluminum sector accounting for 30% of the turnover. Growing environmental and technical requirements had resulted in Hoogovens’s developing into a supplier of flue-gas desulfurizing installations. On his retirement in 1988 the departing director, J.D. Hooglandt, summed up the current strategy: “not more steel, but doing more with it.”

Principal Subsidiaries

Hoogovens Groep BV; Hoogovens IJmuiden; Hoogovens IJmuiden Verkoopkantoor BV; NVW (U.S.A.) Inc.; Huizenbezit “Breesaap” BV; NEBAM Nederlandse Bevrachting en Agentuur Maatschappij BV; Cindu Chemicals BV (50%); Hoogovens Court Chrome vof (50%); Hoogovens Delfstoffen BV; SA Carriers de Nameche (Belgium, 50%); SA Dolomeuse (Belgium, 50%); Oremco Inc. (U.S.A., 60%); Hoogovens (UK) Ltd.; Hille & Muller Group (Germany, 50%); Holco Corporation (U.S.A.); SAB Profiel BV; Hoogovens Aluminium BV; Hoogovens Aluminium GmbH (Germany); Aluminium Delfzijl BV; Hoogovens Aluminium Hüttenwerk GmbH (Germany 99.5%); Sidal NV (Belgium); Geisler Lignian Distributie NV (Belgium, 77.8%); Sidal Aluminium Service Center NV (Belgium); Sidal Alluminio SpA (Italy); Sidal Aluminio SA (Spain); Sidal Aluminium A/S (Denmark); Sidal Aluminium Sarl (France); Sidal Aluminum Corporation (U.S.A.); Sidal Aluminium Ltd. (U.K.); Sidal (Portugal) Lda.; Simec NV (Belgium); Sidalmetaal BV; Sidalmetall GmbH (Germany); Werk Koblenz (Germany); BUG-Alutechnik GmbH (Germany); Vaassen Aluminium BV; Nyffeler Corti AG (Switzerland); Phénix Aluminium S.A. (Belgium); Hoogovens Technische Dienstverlening BV; ESTS BV; Hoogovens Technical Services (U.S.A.) Inc.; Bailey-Hoogovens U.S.A., Inc.; Esmil Water Systems BV; CIM Engineering CV (Eindhoven, 50%); Nucon Engineering and Contracting BV (50%); TAC-Groep BV; “GEN.CHART” vof (50%); Cobam NV (Belgium, 50%); CV Assurantiebedrijf Gebroeders Scheuer (66.7%); Scheuer Holding BV (50%); Esmil BV; Esmil International BV; Hoogovens Industríele Toeleveringsbedrijven BV; Alu Vaassen BV/Premetaal BV; Gieterij Nunspeet BV; Nederlandse Draadindustrie NDI BV/ Thibo Draad BV; Staalcenter Roermond BV; Van Schothorst BV; Rigida SA (France); Cirex BV; De Globe BV (50%); Hoogovens Handel BV; Hoogovens Handel Wapeningsstaal BV; Hoogovens Handel Constructiestaal BV; Hoogovens Handel Metals BV; NV Charles Sternotte (Belgium, 99.9%); VBF Buizen BV.