Market environment

Global economic situation

The global economy was again driven primarily by Asia (especially China and India) and South America (particularly Brazil) in the business year 2010/11. In these regions, the economic crisis of 2008 and 2009 merely temporarily paused the economic growth that has been robust for years. The exports to these regions have again climbed rapidly, contributing to a recovery in most of Europe’s economies, particularly Germany, that arrived more quickly than expected. While the countries in Western, Central, and Northern Europe again reported sizeable growth rates, the economic situation in Southern Europe and the westernmost part of the continent continued to be strained. In contrast, 2010 saw the first signs of recovery in Eastern Europe. The economic uptrend in the USA also experienced some increased momentum in the course of the year, although it is being hampered by the continuing critical situation with regard to both public and private debt and high unemployment.

Development in the most important customer industries

The global economic recovery that began in the first half of the business year 2010/11 gained momentum in the course of the year. The significant improvement of the overall economic environment compared to the previous year led—albeit with varying intensity—to a pronounced increase in demand from practically all customer industries that are important for the voestalpine Group. It is particularly noteworthy that the sustained upswing in the automotive industry, which is being driven primarily by an export boom to the Far East, is benefiting the Group’s largest customer segment that accounts for one third of the Group’s revenue. In addition to the outstanding level of demand for premium-class cars—especially considering the earlier dramatic losses during the crisis—,the markedly positive development of the commercial vehicle sector, which has by and large also recovered in Europe, is also notable. The mechanical engineering sector has also found its way back to its former strong position and, similarly to the automotive industry, has profited mainly from the strong export performance of Germany and some other European countries. This also applies largely to the consumer goods industry, which, however, had already shown itself to be relatively resistant to crises. In recent months, the development of the global railway infrastructure sector has been largely stable at a high level, although the regional differences have been considerable depending on the degree of latitude in public-sector budgets.

The market environment in the aviation industry has also improved distinctly compared to the previous year. In contrast, demand from the construction and construction supply industry—more or less a niche segment in the voestalpine Group—has continued to be restrained.

The worldwide escalating discussion surrounding nuclear power and the increasing demand in the sector of fossil energy sources due to economic growth resulted in a very strong investment momentum in the impacted industry segments; for voestalpine, the sectors of oil and gas exploration and extraction and thermal energy generation are of particular importance. Demand also rose in the sector of renewable energies; here, however, the situation differs greatly from country to country and has become significantly less attractive in some areas due to public policy on subsidies and still unsolved infrastructure issues (for example, with regard to expansion of the grid and energy storage technologies).

Development of the steel industry

As had already been the case in recent years, the development of the steel industry in 2010/11 reflected the overall economic climate—in general, a high level of economic momentum globally, however, at the same time, significant differences between individual regions with regard to speed and extent of the recovery.

In the first half of the 2010 calendar year, worldwide crude steel production not only reached the pre-crisis level but reported a new monthly record of 125 million tons in May 2010. After a slight decline over the summer, which, however, was due less to the economic situation than to the fact that customer inventories were leveling off to a realistic level of demand, the upward trend continued, resulting in a new production record of just under 130 million tons in March 2011.

The European steel market (EU 27) reported a similar trend; here, however, despite significant increases compared to the immediately preceding periods, production figures (of just over 45 million tons in the first calendar quarter of 2011) were still distinctly below their pre-crisis level of roughly 56 million tons. This corresponds to a capacity utilization of about 80%.

In the business year 2010/11, the inventories of the European steel manufacturers and processors remained largely at a normal level. In the past business year, the voestalpine Group fully utilized its steel manufacturing capacity, apart from individual scheduled facility shutdowns for maintenance and repair.

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