Market environment
and business development

The global nature of its business and its diversified portfolio that contains customer segments that are comparatively independent of the economic situation were the most significant factors for the continued positive development of the Metal Engineering Division.

In the Rail Technology business segment, the somewhat decreased investment activity in European railway infrastructure was compensated by exports to countries with a wealth of raw materials and to countries with high-speed projects, such as Russia, South Africa, Australia, and Brazil. The heat-treated, premium rails that are manufactured at the Donawitz site continue to be successfully utilized for heavy, high-speed, and mixed traffic. On the other hand, production of standard grades at the Duisburg site has been facing intensive competition for some time due to serious overcapacities in this segment overall. Therefore, as previously announced, operations will be discontinued toward the end of the 2013 calendar year.

The division’s worldwide presence in the Turnout Technology business segment has sustained its stable performance and compensated the downward trend in some parts of Europe. Viewed regionally, demand in Southern Europe was at a minimum, and activities in Germany also declined, due primarily to a decrease in export sales. Demand in North America and Brazil continues to be high and business with countries in the Middle East is developing satisfactorily. More projects were contracted in China in the 2012 calendar year, albeit shifting somewhat from high-speed tracks to mass transit.

Demand in the Wire business segment was affected by the weakened European automobile industry and reduction of inventory levels by customers as they await lower prices. Toward the end of the third quarter of 2012/13, however, the situation stabilized.

Although exploration in North America, an important market for the Seamless Tube business segment, has been decreasing, business performance for this segment has remained at a high level. Due to the division’s strengths in product development and ability to move to other markets, such as Russia, the MENA region, or Australia, it was able to compensate for the decline in North America. Furthermore, the fact that the division is less dependent than the competition on standard industrial tubes, which are more vulnerable to the performance of the economy, aided its solid performance.

In the first three quarters of 2012/13, the Welding Consumables business segment was characterized by a rather cautious market environment in Europe. Demand in North America is in significantly better shape. In Asia, particularly in China, the economic environment remained subdued due to the sluggish progress of power plant projects. Nevertheless, business performance was satisfactory in this segment as well.

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