The economic upward trend in the Steel Division already evident in the closing quarter of the past business year continued (with the usual seasonal fluctuations) throughout the business year 2017/18. Supported especially by increasing momentum in Europe over the course of the year, the division succeeded in delivering its best result by far since the onset of the financial and economic crisis. In addition to the favorable environment, the excellent development stems not least from the consistent implementation of our efforts to boost efficiency across all stages of value creation. This was proof yet again that continuous process and cost-optimization measures are not inconsistent with an ambitious approach to quality. Furthermore, the investments made in the past years into the continuous expansion of the product mix have played a crucial role in the division’s excellent performance.
As expected, China, the world’s largest steel producer, also influenced the European steel market in 2017/18, primarily because Chinese steel producers tried to stick to their policy of steadily expanding global exports over the past years in order to offset slowing domestic demand. However, trade measures in the form of across-the-board import duties (including in Europe) as well as growing public resistance to rising air pollution in urban centers led in 2017 to the first serious efforts to close down ageing Chinese steel production capacities. The significant decline in Chinese exports over the course of the calendar year 2017 should be considered in this light and in relation to positive demand in China’s domestic market. All in all, ultimately steel imports to Europe did not decline as a result regardless, because rising imports from other countries (including Turkey, India, South Korea, and Iran) offset lower Chinese delivery volumes. But the decline in China’s tendency to flood markets reduced the pressure on the market. Against this backdrop, the European steel industry’s capacity utilization rates increased significantly in 2017.
Towards the end of the business year 2017/18, the announcements by the US administration of their intention to impose global punitive import tariffs on steel imports to the United States led to uncertainty with respect to future developments in an otherwise thriving market environment. The EU Commission initiated intensive efforts, which were still ongoing at the time of Annual Report was written, to achieve a permanent exemption for the European steel industry. Although the direct impact on the Steel Division of import restrictions into the USA is limited, any diversionary effects on the global trade flows of steel products could represent a potential threat to some extent. At the end of March 2018, the European Commission initiated a “Safeguard Measures” procedure to curb the threat of a flood of imports to Europe.
In terms of sales, the Steel Division profited from the excellent performance of all of its key industry segments during the business year 2017/18. The division’s most important (in terms of volume) as well as qualitatively most sophisticated customer segment—the automotive industry—saw strong and stable demand. In 2017, the automotive manufacturers succeeded in boosting sales of passenger cars in Europe for the fourth year in a row. Even in the Steel Division’s most important premium segment, which has been booming for years, the number of vehicle registrations continued to rise even further. All in all, demand from the white goods and consumer goods sectors remained high. During the past business year, the mechanical engineering industry was embedded in an increasingly dynamic market environment based on improved capacity utilization in the industry together with the stable low interest rate environment.
Although project activity in the oil and gas sector was only moderate overall, the Heavy Plate business segment secured several large volume orders with extremely exacting production specifications in this sector. In lieu of deliveries for the “Nord Stream II” pipeline project, which were successfully completed by the end of the business year 2017/18, currently follow-up orders for extremely sophisticated steel grades, especially in the deep-sea pipeline segment, are being completed.
The first year of full-capacity production at the direct reduction plant in Corpus Christi, Texas, USA, was characterized by excellent product quality, a solid market environment, but also numerous freak weather conditions. While the plant and the surrounding area, in particular, were impacted by Hurricane Harvey at the end of August and in September 2017, winter weather, which was wholly atypical for Texas, and which had a substantial impact on the site’s supply infrastructure, hit in January 2018. Despite these adversities, the plant fulfilled its contractual obligations by supplying its customers throughout the entire business year 2017/18.