The COVID-19 pandemic dampened demand for both tool steel and special materials much of the time during the business year 2020/21. While a slight rebound did not make itself felt in the markets until the reporting period’s third quarter, it solidified toward the period’s end.
The production capacities of the High Performance Metals Division had to be adjusted accordingly to the lower demand. This affected production facilities and companies with a strong focus on the aerospace and oil & natural gas industries the most. Comprehensive measures were taken in this environment with respect to both costs and efficiency in order to stabilize earnings and cash flows.
This also concerned the Value Added Services business segment, which comprises the company’s international distribution network. In addition to capacity adjustments, this segment also concentrated business centers in some areas.
Yet the division saw growth despite the difficult environment in the cutting-edge, strategic field of 3D printing, specifically, in connection with the production of metallurgical powder as well as the production of parts and components using additive processes. By now, the High Performance Metals Division possesses a global network of 3D printing facilities.
Tool Steel
Within the tool steel product segment, medical technology performed very well throughout the business year 2020/21 on account of the COVID-19 pandemic.
Following the sharp downturn at the start of the reporting period, the product segment’s other markets saw a rebound in its second half that gathered momentum toward its end.
The automotive industry, in particular, which had suspended production at the beginning of the business year, recovered once its plants were started up again over the Northern summer. Because new projects and models were delayed, however, demand for tool steel rose but moderately at first, and it did not intensify until the end of the business year 2020/21.
The consumer goods industry was less volatile on the whole, not least owing to China’s relatively robust performance throughout the reporting period. All other economic regions saw a strong rebound in the business year’s second half.
Special Materials
The division’s special materials product segment was confronted with massive cutbacks in the aerospace industry throughout the business year 2020/21. Demand on the part of the major aircraft manufacturers remained muted although air traffic rose in the continental markets of both China and the United States as the year wore on. Aside from the substantially lower construction rate, this was also due to the reduction in inventories of completed aircraft.
The oil and natural gas industry saw a slight rebound in the second half of the business year 2020/21, after the highly challenging market environment at its beginning. As a result, oil fields that had already been developed were expanded, enabling the division to profit especially from offshore projects. The slight increase in crude oil prices in the reporting period’s third quarter also triggered a slight rebound in exploration activity. Yet demand for the division’s products rose but moderately owing to large inventories.
Regional Development
Europe
In the European Union, particularly the plant shutdowns across the automotive industry at the start of the business year 2020/21 triggered a significant downturn in demand for tool steel. As the year wore on, however, auto sales in Europe improved, driven not least by incentive programs such as the lowering of the valued-added tax (VAT) in Germany. While this market segment signaled a slight rebound with respect to the products of the High Performance Metals Division from the middle of the reporting period, the upward trends did not really make themselves felt until its end.
Heavy haul commercial vehicles saw a pronounced recovery in the course of the business year 2020/21 as a result of catch-up effects and humming activity in the construction industry. The uptrend also affected the mechanical engineering segment. Demand for high-speed steel such as that required for drills also rose on account of the lockdowns in Europe and the resulting increase in do-it-yourselfers’ activities at home.
While the aerospace industry accounted for the largest decline over all in the European market, it did stabilize in the reporting period’s second half.
North America
In North America, the division was affected the most by the economic fallout from the COVID-19 pandemic because aerospace as well as oil and natural gas account for a disproportionately large share of its product portfolio.
The freefall in crude oil prices hit the oil and natural gas industry especially hard at the start of the pandemic. As a result, exploration activity was limited to the most efficient and cost-effective extraction sites—with dire consequences for equipment demand. As oil prices recovered from their lows over the course of the business year 2020/21, exploration activity expanded again, albeit at a slow pace. Despite the rebound in the business year’s second half, however, this meant that demand for the division’s special materials remained low on the whole.
Just as in Europe, the U.S. automotive industry also had to contend with production shutdowns at the start of the reporting period. While demand recovered in this industry after the Northern summer just as it did in the expansive toolmaking industry, it remained stuck at a moderate level over all.
As before, the Section 232 protectionist tariffs of 25% on all steel products continue to make things a lot more difficult for the High Performance Metals Division.
South America/Brazil
Compared with other economic regions, Brazil’s governmental authorities imposed far fewer restrictions in connection with the fight against the pandemic. Demand did melt down here, too, at the start of the business year 2020/21, but the market recovered rapidly. In addition to relatively stable domestic demand for tool steel, demand from the oil and natural gas industry for special materials also rebounded as the year wore on. Moreover, currency relations had a stimulating effect on the Brazilian economy and, consequently, on demand for the division’s products.
Asia/China
Market developments in Asia were uneven. While China rapidly returned to economic strength at the start of the reporting period, other Asian markets suffered palpably from the pandemic.
In China, demand for both tool steel and high-speed steel was initially driven by the markets for consumer goods (especially entertainment electronics) and medical technology. As time wore on, even the automotive industry’s demand for the division’s products increased. on the whole, therefore, China turned out to be the most robust market during the business year 2020/21.
