The cuts would fall on both “production and administration”, while the further reduction of the payroll would happen through “outsourcing to external service providers or the sale of business activities”, Thyssenkrupp said in a statement.

Currently around 27,000 people are employed in the steel division, which has been battered by high production costs and fierce competition from Asian rivals.

While reducing the headcount, Thyssenkrupp said it would lower its production capacity to around nine million tonnes from 11.5 million tonnes.

The group will also seek to sell its shares in the Krupp Mannesmann steelworks in the western German city of Duisburg, where Thyssenkrupp is based.

If a buyer for the shares cannot be found, Thyssenkrupp said it would “hold talks with the other shareholders about mutually agreed closure scenarios” for the works.

A processing centre in Kreuztal-Eichen in western Germany would also be closed, the steelmaker said.

The group needed to respond to “changed market conditions through targeted capacity adjustments and cost reductions”, the spokesman for the board of Thyssenkrupp’s steel subsidiary, Dennis Grimm, said in a statement.

The company wanted to “create long-term prospects for as many of our employees as possible”, Grimm said.

But, unions said Thyssenkrupp’s decision to reduce its employee numbers by several thousand “crosses red lines”.

“Anyone who wants to lay off more than 11,000 employees and close a site must expect fierce resistance,” IG Metall union leader for the region of North Rhine-Westphalia, Knut Giesler, said in a statement.

The group has long sought to spin off the steel unit, which is Germany’s biggest steelmaker.

Earlier this year it completed a key step by selling a 20% stake to a group owned by Czech billionaire Daniel Kretinsky.

Talks are continuing with Kretinsky, with the goal that he will eventually hold 50% of the unit.

The restructuring plan has been agreed with Kretinsky’s EP Group, Thyssenkrupp said.