Up to the third calendar quarter 2011, the global economy was characterized by a broad-based upwards trend. Only the crisis-ridden countries in Southern Europe, the countries in North Africa that are undergoing political upheaval, and parts of the Middle East were excluded from this trend. Toward the end of the year, however, the economic situation became regionally differentiated. While North America and the markets in Northern and Western Europe continued to be relatively stable, the situation in the rest of Europe, particularly in the southern part of the continent, became increasingly critical; at the same time, doubts about the sustainability of the upward trend in China and in major South American countries became more insistent.

From the fourth calendar quarter on, however, recessionary trends in Europe, resulting from ongoing escalation of the debt crisis, especially in Greece and Spain, as well as greater volatility in the economies of China and Brazil resulted in increased uncertainty about the continued recovery of the global markets. Even the comparatively favorable US economic figures and a recovery of the Japanese economy from the disasters in March 2011 that was more rapid than expected could not change the overall economic picture. Now, in mid-2012, growing nervousness on the capital markets and persistent doubts about the crisis resistance of the financial markets is not being conducive to strengthening confidence in a positive economic outlook for the rest of the year.

The challenging macroeconomic climate is increasingly leaving its mark on the real economy, especially in Europe. In addition to the construction and construction supply industries that have still not returned to their former levels after the crisis years 2008 and 2009, significant parts of the automobile industry and of the energy sector have now begun to suffer from a growing weakness in demand. And although the development of the mechanical engineering sector, the aviation industry, and railway infrastructure continues to be satisfactory, this cannot compensate the negative impact on the other sectors.

In this environment, very specific challenges are looming for the European steel industry, particularly in the flat steel segment. This industry that is beset by structural overcapacity is still a long way from the summer recovery that had been anticipated in early 2012, and even the probability of a sustainable upswing in the latter part of the year is receding. Massive underutilization of capacity in Europe, especially in the ordinary steel industry, combined with extremely volatile raw materials prices, which are, however, trending downward, is resulting in destructive price wars.

Against this backdrop, once again, the voestalpine Group’s consistent downstream strategy, in conjunction with its technology and quality leadership, is proving to be the key to differentiating us from the competition. Today, the three processing divisions are generating two thirds of the Group’s revenue and, for the past several quarters, their stable operating results have been largely compensating the volatility of the Steel Division. Thus, they are increasingly becoming the determining factor for the Group’s earning potential and are setting the course for its transformation from a steel corporation to a processing and technology corporation. As far as the operating result is concerned, this means that despite the difficult environment in the steel sector, due to the Group’s robust downstream operations, from today’s perspective, an operating result that is at about last year’s level should be attainable. Ultimately, however, the development during the rest of the year will continue to be driven by the all too familiar macroeconomic topics of debt crisis, capital market volatility, and skepticism regarding the financial markets as well as the rate of growth in the threshold countries.

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