In the spring of 2010, the global economic situation is being shaped almost exclusively by macroeconomic parameters. The development of individual companies, sometimes even of entire business sectors, is being eclipsed by fundamental debates and decisions concerning political, economic, and monetary policy. In the last decades, the structures and positions within the global economic and monetary fabric have seldom been questioned and challenged as forcefully as has been the case in these weeks and months—from the basic topic of the general relationship between politics and the economy, to the limits of the debt-carrying capacity of national economies and to the question of regulation of capital and financial markets.
Against this backdrop, it is even harder today to predict than it was just a few months ago to what extent the effects of the worst recession of the last decades have been definitively overcome and whether we can assume at least a gradual recovery of the global economy in the next years. In the light of the progressively worsening indebtedness situation in a number of—not only European—countries, the question also arises of whether a broad-based recovery of the world economy in the foreseeable future is even realistic or whether we should assume that this is merely an upswing in individual regions and is itself possibly only temporary.
The decisive role in the answer to this question will be the development of the economic situation in Asia, primarily the sustainability of the uptrend in China. In this context, the Chinese monetary and foreign exchange policies have become increasingly important for the future course of global trade. From the European perspective, it is the further development of the euro in relation to other Western currencies that will determine the economic landscape. Apart from the pacifying effect that a possible euro consolidation would have on the capital markets, current events could also have positive aspects for Europe in the long term. Should a deepening of the economic integration of the European Union or the euro area result from a solution of the indebtedness problems of individual European countries, this would in the long term lead to a significant strengthening of this economic area in terms of worldwide competition.
In addition to all of these fundamental uncertainties, there are a number of unanswered questions from an industry-specific perspective with regard to what the further development of the economic situation might be. Which industries will recover more quickly and which only over the long term? How long will it take to be able to pass on the current doubling of raw materials costs for steel products along the entire value chain to the market? What does it mean for pricing vis-à-vis our customers that after decades of annual price agreements for raw materials, we are now dealing with quarterly price fixing?
But even if there is a great deal that is still unanswered and uncertain for the future, there are a number of facts that allow us to anticipate a continuation of the positive basic trend for the next months. Capacity utilization in the Steel and Railway Systems Divisions is outstanding and the positive trend in the Special Steel, Profilform, and Automotive Divisions is continuing. Demand is stable at a good level in the important customer segments of the automobile and white goods industry, railway infrastructure, and alternative energies, and we are seeing rising demand in the conventional energy segment, in the mechanical engineering and tool manufacturing segments, and in the commercial vehicle industry. Only the construction and aviation sectors have shown hardly any growth. Additional favorable factors that support a continuation of the positive trend are a defused import situation in the European steel sector, customer inventories that are not filled above a normal level in all divisions, and price levels that are trending upward.
In summary, despite the very challenging economic environment that we described at the outset, we are anticipating a continuing improvement of the Group’s operating result, at least for the first half of the business year 2010/11. From today’s perspective, it is almost impossible to make predictions for the second half of the year. However, due to the increasing effect of continuing cost reduction measures, we anticipate that the voestalpine Group’s operating result for the entire business year 2010/11 will be higher than that of the previous year.
