In the second calendar quarter 2015, global crude steel production continued to decrease compared to the previous year, falling by 2.4% after already suffering another drop in the first calendar quarter 2015 by 1.6%. The primary reason for this recessive trend was the situation in China, where crude steel production has declined for the first time after years of massive growth. Most recently, demand for steel in Europe was somewhat higher, so that, compared to the previous year, steel production increased by 0.9% in the second calendar quarter. As a result of the global decline in crude steel production and the concurrent expansion of capacity by iron ore mines, prices for iron ore continued to fall in the early part of the second calendar quarter 2015. Against this backdrop, steel prices on the spot market were not able to recover despite improved capacity utilization in European steel plants. Another reason for this development is the increasing pressure from China and Russia through imports of standard steel grades. Although the European Commission announced the introduction of anti-dumping customs duties on cold-rolled steel products originating in China and Russia, this has not yet mitigated the situation in respect to imports from these countries. In contrast, the price trend in the Steel Division in the first quarter of 2015/16 was better than the general market environment would lead one to expect. Full order books on one hand and on the other, concentration on the top quality segment enable a certain degree of price-based differentiation vis-à-vis the commodity market.
As far as demand is concerned, the automotive industry, which is the division’s core customer segment, demonstrated a continued and stable high level of demand. Despite a certain cautiousness on the part of buyers in China, which is an important market, in the past months, there were no signs of a more broad-based reversal, particularly as registrations of compact and mid-size cars on the European markets have increased substantially in recent months.
The marked upswing in the strongly export-oriented German mechanical engineering industry in the early part of the 2015 calendar year has leveled off somewhat in recent months. This sector is expected to be impacted by a certain degree of volatility throughout 2015. Performance of the construction industry, which is less significant for the Steel Division, in the first three months of the current business year has continued at a low level, although there are differences from region to region. In contrast, the white goods and electrical industries have demonstrated a solid performance in recent months.
In the first quarter of 2015/16, the energy segment, a key industry for the Heavy Plate business segment, suffered from the continuing weak oil price. As a result, no contracts worth mentioning for pipeline projects were awarded. Speculation surrounding TurkStream, the proposed follow-up project for South Stream, came to an end in July 2015 for the time being after the order for the pipe-laying ship was canceled. The situation in the downstream segment is better, however, where demand for heavy plate for the manufacture of appliances has developed satisfactorily. The weak energy segment could be compensated to some extent by the improved development of the civil engineering segment resulting from an increase in infrastructural projects and a boost in orders in the strip segment, which has shown a solid performance.
The largest investment projects in the first quarter of 2015/16 continued to be the construction of the direct reduction plant in Corpus Christi, Texas, the construction of secondary metallurgy system 4 in Linz, Austria (which will start operation in the fall of 2015), and preparations for the replacement of the heavy plate rolling stand, also in Linz, that is scheduled for October 2015. In July 2015, ground was broken for the new continuous casting facility CC8 at the Linz site.
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