Market environment and business development

In the first quarter of 2012/13, business development of the Special Steel Division was slightly down compared to the immediately preceding quarter (fourth quarter 2011/12); in comparison to the first three—very strong—months of the previous business year, however, performance fell more markedly. This is due primarily to significantly more cautious order patterns on the part of many customers, which is the result of increasing growth concerns in a number of threshold countries on one hand, and on the other, of the situation in Europe that continues to be volatile. Overall, the Special Steel Division nevertheless achieved a satisfactory result in the first quarter of 2012/13, although it must be said, that the pressure in some of its most important markets has gained significantly in intensity.

Thus far, the business year 2012/13 has continued to see solid demand in the automotive (with the exception of the commercial vehicle segment), oil and gas exploration, mechanical engineering, consumer goods, and aviation sectors. Performance of the energy equipment segment, however, has continued to be weak.

In the product categories, the performance of specialities in special steel, such as anti-magnetic drill collars for oil and gas production continued to be stable. Demand for tool steel was somewhat invigorated in the last several months, while demand for high-speed steel has been recently trending downward. The market environment for special steels for the aviation industry and oil and gas production as well as powder-metallurgical special steels and nickel-based alloys has continued to be robust. In the past months, demand for special structural steel has been weak as this segment has been significantly affected by cautious customer behavior in the energy equipment segment.

Comparing the performance of the most important sales regions of the Special Steel Division, growth in Brazil in the last quarter has become considerably weaker and Asia has also experienced a slowdown in growth. The development of the market has been largely stable in the USA and in Europe north of the Alps, particularly Germany, while uncertainty has been increasingly evident in the Southern European markets due to the sovereign debt crisis and its effects on the real economy.

Overall, capacities in the production companies of the Special Steel Division have been well utilized in the first quarter of the current business year, in other words, for the most part, they are being fully utilized. From today’s vantage point, however, some selected adjustments in our capacities will be necessary in the course of the business year.

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