Market conditions changed little in comparison to the previous year, so the strategy followed by the High Performance Metals Division (formerly Special Steel Division) during past business years of consistently focusing on technological innovations in the product sector, as well as establishing a global network of comprehensive sales and service activities, resulted in a significant improvement in earnings performance in 2016/17. After restrained business performance during the first three quarters, the final quarter of the year was marked by a perceptible rise in incoming orders and an increase in deliveries. Despite positive demand from the automotive and consumer goods industries, the key customer segments for tool steel products, it was a severe fall in special steel consumption in the oil and gas sector together with associated changes in the product mix which placed pressure on tool steel prices. For the remaining key revenue generators, demand from the mechanical engineering industry was still muted whereas performance in the aerospace industry remained positive.
Seen regionally, economic development during the business year 2016/17 was far from uniform. Demand in Europe remained at only a moderate level, despite positive developments in the automotive and consumer goods industries. In addition to the structural weakness in Europe’s power plant and energy engineering industries which has dragged on for several years, general mechanical engineering also remained below the expectations held at the start of the year for reasons including continued weak demand from China and Russia, the most important export markets. Nor was there any perceptible recovery in the USA. Although the strengthening of the dollar vis-à-vis the euro improved the division’s competitiveness for sales of products manufactured in Europe, increasing numbers of protectionist measures enacted by the US administration negated this positive effect over the course of the year. Moreover, the general US market environment lacked dynamism in the business year 2016/17. A positive exception was deliveries to the aerospace industry which were substantially higher than in the previous year, both in terms of volume and value. An initial uptick in orders from the oil and gas industry at the end of 2016 suggests that the slump in this sector has bottomed out in the USA. One positive development, which was primarily due to the booming automotive industry, was an increase in demand for tool steel in Mexico, even though the political changes in the USA make longer-term developments harder to predict.
Despite political changes in Brazil, during the past business year there has been no improvement in the economic climate. The processing industries, especially the automotive and mechanical engineering industries, were still confronted with low levels of capacity utilization, and investments in the oil and gas industry have remained at a consistently weak level. Although a devaluation of the Brazilian real in the previous period encouraged exports from local sites, this exchange rate advantage was lost after a currency revaluation in 2016.
In Asia, especially China, the division profited from continued positive economic development. Despite somewhat sluggish industrial growth, deliveries in China rose significantly in a year-over-year comparison. The main positive momentum came from the automotive and consumer goods industries which saw an increase in demand for high-quality tool steel.
In terms of production, during the business year 2016/17 the division succeeded in further increasing the share of premium products, although deliveries to the technologically-sophisticated oil and gas sector were at a low level. The situation for forging products for the heavy mechanical engineering and energy engineering industries remained challenging. In contrast, sales volumes rose in the tool steel and precision strip steel product categories in 2016/17, with the anti-dumping proceedings instigated by the European Commission against imports from China having a positive impact on volume growth. Demand for special steels for the aerospace industry continued at a very positive level, so that a major investment for the production of aircraft components will be launched in the current business year.
In the Value Added Services business segment the expansion of service offerings progressed as planned during the past business year. The division’s consistent strategy of expanding this business segment with its 160 existing service centers, in order to further strengthen its leading position as a premium service provider for toolmaking worldwide, serves to increase customer retention and, as a result, to achieve continuous growth in delivery volumes.