As was the case throughout the entire Group, growing regional political instability, economic embargos, often drastic declines in raw materials prices, and significant currency fluctuations dampened the Special Steel Division’s economic environment in the past business year. The oil price that remained low reduced oil and natural gas exploration and the associated use of special steel in this important customer industry, leading to a substantial decrease in incoming orders from this sector. The division’s sales in the mechanical engineering sector were adversely impacted by diminished demand, particularly from China, while in contrast, the trend in the aerospace sector continued to be positive. Demand in the tool steel segment also remained healthy, primarily due to a high level of incoming orders from the automotive industry.
Viewed regionally, the picture during the business year just ended varied widely from region to region. Despite a stable trend in the automotive and consumer goods industries and the continuing positive outlook in the aerospace sector, Europe otherwise remained a market with little growth momentum. Energy engineering (power plants), a sector which has been weak for years, did not demonstrate any noticeable trend toward recovery, and the mechanical engineering sector also remained below expectations. The low level of investment activity in the oil and natural gas industries worldwide has also had a considerable negative effect on the European suppliers of global oil field equipment manufacturers. The direct impact of the political conflict between Russia and Ukraine remained minimal, however, certain indirect effects, primarily in the mechanical engineering sector and in the agricultural industry were noticeable.
In the USA, business volume with Europe grew substantially in 2015/16, especially after the devaluation of the euro vis-à-vis the dollar. This applies particularly to the competitive position of the Special Steel Division vis-à-vis its North American competitors in the aerospace sector. Although business with the oil and natural gas industries has been marked by a dramatic slump since the summer of 2015, the oil and natural gas service center in Houston, Texas, USA, which was opened last year, demonstrated its competence as a flexible partner to cover requirements that arise on short notice, showing that a business expansion is possible even in times of crisis. Furthermore, as production capacity in the automotive sector, particularly in Mexico, was expanded, demand for tool steel was on a positive trajectory.
In South America, especially in Brazil, the economic climate in the past business year has continued to worsen. Industry, especially the entire automotive sector, again faced declining sales. Rising unemployment, falling income, and, not least, corruption scandals have depressed investment activity in all major industrial segments. The sole positive aspect of the economic trend in Brazil was the significantly lower rate of exchange of the Brazilian real, which improved its international competitiveness, especially with regard to exports to North America. In Asia, particularly in India and China, the division benefited from the favorable economic trend in the customer industries important for its products so that business activities in this region were expanded compared to previous years.
In the business year 2015/16, the High Performance Metals (production) business segment faced not only less demand but also had to contend with customers’ high inventory levels. As a result, temporary capacity adjustments had to be made at individual locations. Nevertheless, sales of premium products, e.g., remelted and powder-metallurgical steel, increased even further. The market situation for products for the heavy mechanical engineering industry and the energy engineering industry remained challenging. In contrast, demand for special steel for the aerospace industry continued to be very satisfactory. The restructuring process at the Buderus Edelstahl production site in Wetzlar, Germany, continued systematically. The focus remains on a drastic reduction in costs and a partial strategic reorientation toward tool steel products.
In the Value-Added Services business segment, service offerings were increased on a broad basis in the past business year by expanding existing sites and establishing and acquiring new ones (see Chapters “Investments” and “Acquisitions”). By investing in this business segment with its already existing 160 service centers, the division is continuing to expand its leading position as a premium service provider for toolmaking worldwide. Despite challenging market conditions, this resulted in an increase of delivery volume with relatively minor price fluctuation.
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