Thyssenkrupp and Tata Steel Europe are unlikely to implement any major business measures in their prospective joint venture until 2020 when the political consequences of Brexit become clearer. So says thyssenkrupp chief executive Heinrich Hiesinger.

On Wednesday the two firms agreed in principle to combine their respective European steel activities in a 50/50 JV. At thyssenkrupp’s press conference to announce the deal, attended by Kallanish, Hiesinger said: “The merger is our best preventive measure against Brexit. With jointly owned sites in the UK, the Netherlands and in Germany, the set-up is much better for us than now.” Currently, thyssenkrupp still ships “…a lot of steel” from Duisburg to the UK.

On the eve of the announcement, media reported that thyssenkrupp’s management and representatives of the workforce had reached a rapprochement on the issue of the merger. Still, employees were heard to be taken by surprise by the actual announcement.

Hiesinger confirmed at the conference his optimism over further talks with the unions. He maintained his position that “…we cannot close our eyes to the realities, and it is our responsibility as the management to face the necessities.”

He reiterated that the merger would cost fewer jobs than keeping the companies separate. Mere restructuring, he said, is a vicious circle in which you gain short-term advantages, but have to start anew after three to four years. “You restructure yourself to death,” he commented. “We have examined all alternatives, and none of them tackles the actual problem of overcapacity.”

Another strength of the merger should be the partners’ influence on price stability, according to Commerzbank analyst Ingo Schachel. “It’s clear that there are now two very sizable players owned by two steel producers that are regarded as disciplined and professional, which should be useful for the European pricing environment,” he was quoted as saying by Bloomberg.

Such strength may not be welcomed by all players, given that now “…European steel is largely in the hands of two Indian companies,” a scrap recycler source said. He noted positively that Ijmuiden has become a model plant in the hands of Tata. But he also recalled how during the price collapse of mid-2008 ArcelorMittal simply did not adhere to contracts forged only weeks earlier, and paid only half the prices agreed for scrap. “We had not seen such conduct before,” he commented.