The market environment of the Special Steel Division in the first quarter of 2015/16 remained largely unchanged compared to the fourth quarter of the previous business year. Only the oil and natural gas sectors experienced a significant decline in incoming orders due to the development of the oil price. The strategy of maintaining on-site inventory in the USA and Southeast Asia proved to have an inhibiting effect in a positive sense, as it curbed short-term order volatility. The effects of subdued orders from the oil and natural gas sectors, however, are still barely noticeable.
In contrast, positive momentum continued to come from the aviation industry, where a multi-year contract of significant magnitude for sophisticated special steel forgings was signed at the Paris Air Show. The energy engineering industry continued to face challenging conditions: while Europe is increasingly turning its back on the construction of power plants, demand in Asia is being met to an ever greater degree by local suppliers.
Incoming orders from the automotive industry, on the other hand, continued to be strong in the first quarter of 2015/16, thus contributing particularly to the good performance in the tool steel segment.
The most recent development of the oil price together with continuing pressure in the sector of conventional energy resulted regionally in a slight weakening of performance in the European Union. Revenue generated from sales in North America rose, however, due in part to the changes in the rate of exchange. The economic environment in South America deteriorated still further in the early part of the business year 2015/16. Particularly, the automobile industry and the oil and natural gas sectors came under increased pressure. Comprehensive lean management measures at the division’s sites in Brazil were able to largely compensate for the negative effects on earnings. The positive market environment for tool steel in Asia, particularly in China and to an ever greater extent in India, made it possible for the division to continue its trajectory of growth despite weaker market trends in other regions.
Once again, the expansion of the range of services provided, especially in the areas of coating and heat treatment, solidly bolstered performance in the first quarter of 2015/16. There were significant further increases in this segment compared to the previous year. Its leading global market position in the tool steel sector was greatly enhanced by the fact that it has been increasingly positioning itself as a problem solver for its customers.
In the past quarter, the High Performance Metals (production) business segment reported good capacity utilization overall. For the rest of the business year 2015/16, it should be possible to largely compensate the expected negative impacts on capacity utilization as a result of declining orders in the oil and natural gas sectors by undertaking increased sales efforts in other industrial segments. At the product site in Wetzlar, Germany, which has been most strongly affected by the weak energy engineering sector, a reengineering program is currently underway to enable a lasting optimization of earnings.
In order to meet growing demand for premium tool steel, especially from Asia, the site in Hagfors, Sweden, launched the operation of an additional electro slag remelting system in the first quarter of 2015/16 as scheduled. Another such system was ordered and will be put into operation by the middle of next year.
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