The market environment at the end of the previous business year largely continued unchanged in the first quarter of 2012/13. The economic situation is characterized by a level of demand that is largely stable, although it is inconsistent depending on the customer industry. While the Steel Division was able to increase earnings as of short-term contracts entered into in early April 2012, the prices on the spot market declined again in the course of the first quarter of 2012/13 as a result of more cautious order patterns. Quickly implemented short-term capacity adjustments by the European steel industry in response to the harsher market conditions were not able, however, to initiate a reversal of the trend.
Due to its consistent differentiation vis-à-vis the competition by focusing on the top product and quality segments and its stable customer structure with its concentration on long-term partnerships, the Steel Division was able to almost fully utilize its production capacity in the first quarter of the business year 2012/13.
During this period, the situation in the division’s various customer industries can be summarized as follows. The European automobile industry, especially the German manufacturers, continued to experience a solidly favorable trend in the premium segment that is of primary importance for the voestalpine Group, although the pressure on mass market manufacturers rose considerably. The white goods industry remained largely stable at a moderate level, while the construction and construction supply industries continued their weak trend due to the tense situation of government budgets and commensurately cautious investment activity in the public sector. The energy sector that is particularly important for the heavy plate segment experienced high demand from the oil and gas industries, although the momentum in the line-pipe segment most recently slowed somewhat. Due to the roll-back of public subsidies for alternative energies, the wind power segment has not yet recovered, but it is still at a satisfactory level, at least in the voestalpine top product quality segment.
The same applies for the mechanical engineering segment, which has not been able to match the sometimes two-digit growth rates of the past years, but the trend is still very positive as it is driven mainly by the favorable development of German manufacturers. The tube and section industry has remained unchanged at a moderate but stable level. There have been hardly any changes in the market environment of the steel trade and Steel Service Center segments, which have been difficult due to their volatility.
In Europe overall, the steel industry continues to experience very significant structural overcapacity, particularly for standard grades. The cutbacks in production and prospects of new cutbacks have not had any effect on the market thus far.