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Market environment
and business development

As expected, the early part of the business year 2013/14 did not bring any fundamental changes for the Steel Division with regard to the general economic environment. Unutilized capacity in the European steel industry in combination with continuing weak demand is still putting pressure on the steel prices. As there are no indications that any blast furnaces in Europe will be permanently shut down in the near future, a structural improvement of the situation is not to be expected.

The development on the raw materials markets has contributed to an easing of the cost situation, with prices for ore, coal, coke as well as for scrap generally trending downward during the first quarter of 2013/14. However, due to the imbalance between supply and demand, these cost savings are not resulting in an improvement of the European steel industry’s profitability but in price reductions.

Although the current situation does not suggest a market recovery, the first signs of stabilization at a low level are nevertheless beginning to be noticeable. Customers have already reduced orders in expectation of the seasonal decline in demand over the summer; as a result, current inventories are already below average. Considering the stabilization of raw materials prices in the last few weeks and the already very low spot market prices, it can be expected that the second quarter of 2013/14 will not see a repetition of the situation during previous years, when the steel processing industry reduced call-offs to an absolute minimum during the summer months due to the prospect of even lower product prices.

Viewed overall, demand in the industries that are most important for the Steel Division have remained relatively constant (in comparison to the previous business year as well). While new automobile registrations in Europe automobile industry hit a low point in May and June 2013, the premium manufacturers were able to compensate this decline with high growth rates in the export business; however, many manufacturers of sub-compact and compact cars, which depend mainly on the domestic markets in Europe, are forced to deal with the continuing sub-par capacity utilization of their plants.

Demand in the mechanical engineering industry during the first quarter of 2013/14 declined slightly; in comparison, while the production figures in the white goods industry remained below the peak figures of past years, they nevertheless were at a sound level.

Viewed regionally, the construction and construction supply industries in Europe varied, although the construction industry in Southern and Eastern Europe has practically come to a standstill. This industry’s situation continues to be somewhat better in Germany, Austria, and Northern Europe.

After a more than twelve-month phase of stagnation, the energy industry (heavy plate) has put the first small line pipe projects out to tender, however, the focus in this business segment is currently on the European South Stream project that is set to be awarded this coming fall.

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  • Share price as of June 30, 2013 (euros) 27.13    EPS – Earnings/share (euros) 0.69    Dividend/share (euros) 0.90
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