In the first quarter of 2015/16, the business performance of the Metal Engineering Division was characterized by an excellent level of demand from the railway infrastructure segment on one hand, but on the other, a marked weakening of demand from the oil and natural gas sectors. Overall, this enabled the division to continue to enjoy almost full capacity utilization of steel production in Donawitz, Austria, at the same level as in previous years.
The order situation in the Rail Technology business segment is currently at a record level so that by and large all available production capacity will be utilized throughout the entire business year 2015/16 for orders already received. The reason for the current boom is primarily the reinvigoration of railway infrastructure projects in Europe. The excellent level of incoming orders for high quality rail grades made it possible for the production facilities to transition from three-shift to four-shift operations for the first time ever so that record production is anticipated at the Donawitz site in the business year 2015/16.
In the first quarter of 2015/16, the Turnout Systems business segment also seamlessly maintained its outstanding performance of the past year. In order to keep up with customer demand, special investments will be undertaken in the current business year to expand a range of international production sites. Outside of Europe, North America and China are also seeing demand that remains very satisfactory. Against the backdrop of a decline in mining activity due to the drop in raw materials prices, the markets in Australia and Brazil are currently significantly weaker. As a result of the successful integration of Bathurst Rail Fabrication Center, which was acquired last year, the Turnout Systems business segment has become the clear market leader in Australia.
The Wire Technology business segment saw solid momentum in demand from the automobile industry in the first quarter of 2015/16 but also faced difficult conditions from the oil and natural gas industries. Last year’s acquisition of the Italian wire manufacturer Trafilerie Industriali S.p.A. went very smoothly at the operational level, and the company has already contributed to the satisfactory development of the Wire Technology business segment in the first three months of the current business year.
As a result of the dramatic drop in activities in the oil and natural gas sectors, the market environment in the Seamless Tubes business segment has significantly deteriorated. While capacity in the seamless tube plant in Kindberg, Austria, was still fully utilized throughout the entire business year 2014/15, at the beginning of the current business year, the drop in demand made it necessary to reduce production by one shift. However, the current order status should ensure three-shift operation over the next few months. Incoming orders from North America have significantly declined in recent quarters, but demand from the Middle East is still at a satisfactory level despite increasing competition.
Stable development at an albeit moderate level was demonstrated by the Welding Technology business segment in the previous business year. The subdued situation in Europe, especially in the energy engineering sector, is not showing any signs of recovery in the short term. In contrast, market conditions in the Middle East and in India are better, while the market environment in China has most recently cooled. Since the beginning of the 2015 calendar year, the situation in the Brazilian energy sector has continued to decline.
The most important investments in the Metal Engineering Division were on track—both as far as schedule and budget are concerned. The new wire rod mill in Donawitz, Austria, will be put into operation on schedule at the end of the current business year and will enable the Wire Technology business segment to differentiate itself even more sharply than before from the competition—in terms of both technology and quality. In the fall of 2016, a new walking beam furnace for rail production will be ready for operation; with respect to quality, energy consumption, and throughput, it will represent an additional optimization of rail production.
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