Europe
While economic growth in Europe still was largely stable during the first half of the business year 2018/19 despite negative forecasts resulting from the trade conflicts that the United States has triggered, the momentum clearly slowed down in the third business quarter. This not least due to both the increasing general weakness of the market in China, a key export country, and the switch in emissions testing of passenger cars to uniform standards worldwide (i.e. the Worldwide Harmonized Light Vehicle Test Procedure (WLTP)), which had unexpectedly strong effects on automotive production, particularly in Germany.
Add to that the first palpable effects on the real economy of the global trade conflict emanating from the U.S. since the spring of 2018, which increasingly undermined exports even from the European Union (EU) in the final months of 2018. The political differences of opinion between individual EU member states, some of which were aired in public, regarding the bloc’s future fiscal policies contributed as little to the creation of a positive economic climate as did the negotiations with Great Britain regarding its exit from the European Union.
In this environment, the voestalpine Group was affected in the third business quarter by declining and volatile demand, particularly on account of its close association with the European automotive industry. The consumer goods and electrical industry started to feel the negative effects of the global trade war during the third business quarter, whereas demand in the infrastructure-oriented market segments (construction industry and railway systems) as well as in the oil and natural gas sector (with the exception of North America) remained largely stable—despite the downward trend in oil prices.
North America
The by now longest period of economic growth in the history of the United States continued unabated in 2018 as well, even though the economic momentum started to level off somewhat in the year’s last calendar quarter. For one, this is due to the fact that in 2018 interest rates rose again for the first time in quite a while and, for another, also to the growing realization that the effects from the country’s isolationist policies might harm not just other countries but, in the final analysis, the American economy, too. Notwithstanding the foregoing, the increasingly intense and controversial debates at the political level—triggered by the project (pushed by Republicans) of building a wall at the Mexican border—led to a several-week-long government shutdown in the United States at the end of 2018 that will have negative effects on economic developments in the short term.
Yet the country published excellent economic and labor market data at the end of 2018, fueling the expectation that the positive momentum will continue in 2019 as well.
In 2018, the voestalpine Group succeeded in benefitting from the positive environment overall in the U.S., especially in the railway systems and aerospace market segments, whereas mechanical engineering and the automotive industry trended laterally for the most part. Despite the volatile development of oil prices—with the exception of temporary signs of weakness in the fourth calendar quarter—demand in the oil and natural gas industry was good, but the voestalpine Group was able to benefit from it only to a limited extent owing to the U.S.’s protectionist tariffs.
China
During the business year 2018/19, the Chinese economy started to suffer increasingly from the effects of the trade war with the United States. While sales volumes in what has become the world’s largest automotive market began to decline as early as in the summer, weakening trends on both the consumption and the investment side made themselves felt in the fall. The increasingly protectionist stance of a growing number of countries caused China’s exports to decline as well.
China’s central government reacted to these developments with a number of stimulus measures, preferably (as usual) in the realm of infrastructure but also in funding.
As far as the voestalpine Group is concerned, this translated, for one, into weaker demand for tool steel for the automotive, mechanical engineering, and consumer goods industry but, for another, also into a substantial increase in demand for products in the railway infrastructure sector.
Brazil
While Brazil found its way back to a moderate growth track in 2018 after many years of recession, the upturn failed to meet the high level of expectations at the start of 2018.
This was due to developments inherent in the country itself which, after a number of negative political events, was caught in a presidential election campaign that lasted almost an entire year. But it was also due to external developments such as rising interest rates in the US dollar sphere and the trade barriers being thrown up by the United States (Brazil’s most important export market) in the form of import quotas on a number of Brazilian products. Moreover, South America on the whole was adversely affected by critical developments in Venezuela, as well as in Argentina, that continue unabated.
In this moderately improved economic environment overall, the Brazilian sites of the voestalpine Group—which work primarily in tool steel and special materials as well as special sections and railway infrastructure—delivered positive performance throughout the first nine months of the business year 2018/19.
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