Letter to Shareholders

Rarely has it been so difficult to predict what the second half of the business year will be like despite a very satisfactory first six months. This does not just apply to Europe but also to most of the other global economic regions. Let us begin with the more straightforward forecasts: one does not have to be a prophet to predict that the recessive trend will continue for Brazil and Russia: the former’s domestic structural, political, and economic problems are too far-reaching and the latter’s political relationships and the sanction mechanisms—particularly with regard to the European Union— that impact it are too complex to expect the economic situation to improve in the short term. Japan should be able to generate some economic growth, while India’s growth is anticipated to be quite substantial, but nevertheless neither region is expected to provide any appreciable growth momentum for the global economy as they will be too preoccupied with themselves—at least in the near future.

America, China, and Europe: what are the expectations for these regions in the coming months? America—or more precisely the USA and Mexico—should be able to maintain their growth momentum in the near future despite the appreciation of the US dollar and rising expectations of an increase in the interest rate. However, here, too, the air is getting thin. As far as the development of the Chinese economy is concerned, one should not fall prey to any illusions: after around twelve years of constant and breathtakingly rapid growth, a phase of consolidation is long overdue. The country’s economic success has to be “digested” at some point and must be equitably distributed. Otherwise, the desired transformation from a state-controlled economy to a consumption-driven society will remain an illusion and will be replaced by rapidly increasing political and social tensions. And this is something that no one wants—either within or outside of China. Realistically, Chinese growth momentum will abate somewhat in the interest of long-term sustainability of its economic development; this also applies to the impetus for growth on a global scale. And Europe? Is it really time—as more and more economists have suggested—to undertake a kind of economic co-leadership at a global level, perhaps together with the USA? Any observer who has retained any sense of reality will have a major problem with such ideas. Despite the economic progress that has unquestionably been made, Europe still has plenty of homework to accomplish—the final turnaround in Southern Europe, the recapitalization of the banks and state finances in a number of countries, the enormous refugee problem, growing escalation in the war and crisis zones in the Middle East, practically on its doorstep, and more. With all of these problems on its plate, Europe will be lucky if it is able to maintain a modest level of growth in the next year.

What will the next six, nine, or twelve months really look like? Considering the aforementioned problems, the stronger arguments are probably on the side of those who sound a note of caution rather than on the side of the optimists. After all, there is a whole litany of problematic issues, such as the continuing crisis in the oil and natural gas industries—in fact, the entire energy sector—the ruinous worldwide overcapacity in mining, in the steel industry, and others. All of this is not the stuff that rapid economic recovery is made of, but rather the stuff of new cost and efficiency optimization programs. But whatever comes—this will not be the first time that voestalpine takes its future into its own hands.

Linz, November 9, 2015

The Management Board