Market environment and business development

      The performance of the Metal Engineering Division in the business year 2021/22 returned to the level prevailing prior to the outbreak of the COVID-19 pandemic. While the division’s Railway Systems business segment followed a solid trajectory as usual, this time it went hand in hand with a substantial improvement in the performance of the Industrial Systems business segment. The brightening economic environment in the oil and natural gas sector contributed substantially to this outcome. Moreover, the steps that the division took in the business year 2020/21 to lower costs and boost efficiency had a sustained, positive effect on its performance in the reporting period. The exorbitant increases in the cost of energy that buffeted Europe during the business year’s second half were a challenge. But it was not possible to pass these higher costs on directly, especially not in connection with long-term Railway Systems projects. While the contracts generally contain price escalation clauses for key raw materials, this does not apply to energy.

      The Railway Systems business segment, which boasted solid capacity utilization even during strict lockdowns, continued along its highly satisfactory trajectory during the reporting period. Its global alignment, in particular, is the factor that tends to offset regional market weaknesses and thus has a stabilizing effect. Add to that the broad range of high-quality products on which the segment relies. Experience shows that higher volumes are to be expected in the first half of any business year, because investments in the railway infrastructure of the division’s key markets in the Northern hemisphere tend to diminish during the colder season. The rails product segment offers a comprehensive range of high-quality track grades for heavy haul transportation as well as for high speed, mixed, and mass transit systems. In the business year 2021/22, this segment benefited from good development of demand in the so-called “D-A-CH” region comprising Germany, Austria, and Switzerland (the German acronym means “roof”). The Eastern European market saw a palpable rebound, with demand in Poland developing especially well. Deliveries to overseas markets, however, were slightly lower than expected.

      The turnout systems product segment develops and manufactures individual systems solutions in turnout technology. A global network of production facilities ensures that customers can be served locally. Austria, Switzerland, and Spain were the European countries that generated good business momentum during the reporting period. In North America, improving demand from the Class I segment of the major freight railroads in the U.S. stimulated sales. A year earlier, these rail operators had scaled back their investments in the rail network due to the dampening of economic sentiment. The initially very challenging environment in Mexico improved as well. In South America, the massive increases in raw materials prices caused mine operators to make large investments in rail technology. voestalpine’s turnout plants in Brazil thus saw good capacity utiliza­tion throughout the business year 2021/22. Compo­nent orders from Chinese rail operators in the high-speed segment, by contrast, were highly volatile.

      Aside from drive and locking systems for turnouts, the signaling technology product segment also designs monitoring and diagnostic systems for fixed assets and rolling stock. The fallout from the COVID-19 pandemic slightly slowed down the solid growth momentum that this segment had experienced previously. Travel restrictions, for example, led to delays in the development of new markets outside Europe. In the European core markets, however, demand was good throughout the reporting period.

      The Industrial Systems business segment, which had faced difficult conditions in the business year 2020/21, saw a pronounced upward trend during the business year 2021/22. Its wire technology product segment substantially expanded its business volume and solidified its position as an innovative partner for complex wire solutions used in the automotive supplier industry. Order levels were good although the automotive industry’s environment remains a challenge. The intensification of the semiconductor supply chain problems among original equipment manufacturers (OEMs) during the Northern summer of 2021 was exacerbated by wire harness supply bottlenecks that made themselves felt in the fourth business quarter on account of the war in Ukraine. Although passenger car production numbers dropped to historic lows in Europe against this backdrop, capacity utilization at wire technology’s production facilities remained satisfactory.

      The Tubulars product segment of the Industrial Systems business unit delivered the most dramatic rebound. Its main plant in Kindberg, Austria, produces seamless tubes for the oil and natural gas industries. Continually rising crude oil prices stimulated drilling activities. In the previous business year, investments basically came to a standstill on account of the global economic meltdown resulting from the COVID-19 pandemic. But the February 2022 outbreak of the Ukraine war, in particular, caused international oil prices to skyrocket. The so-called rig count in the United States, the segment’s most important sales region, rose significantly year over year in response to this development. Given booming demand coupled with the high cost of raw materials and energy, the spot market prices of Oil Country Tubular Goods (OCTG) reached record levels toward the end of the reporting period. As for the Section 232 protectionist tariffs in the United States, matters have improved for Tubulars since January 1, 2022. While tariffs of 25% were generally slapped on to steel imports from Europe until that date, a new quota system has taken effect since then. As a result, most deliveries of seamless tubes from Austria to the U.S. are exempt from customs duties. Capacity bottlenecks in international container shipping have intensified the volatility of deliveries to overseas markets.

      The welding product segment offers welding solutions for high-end industries such as the oil and natural gas sector, the metal industry, and the automotive industry. Here, too, the COVID-19 crisis had a considerable impact during the business year 2020/21. In the business year 2021/22, by contrast, welding posted dramatic gains in all its key customer segments. Regionally speaking, the sales volume in Europe developed along a highly positive trajectory. The segment’s business volume in China expanded as well, even though energy shortages in the Northern fall of 2021 led to temporary production shutdowns at the plant in Suzhou. Mexico, Brazil, and Canada all offered a positive market environment, whereas the momentum in the United States was initially restrained. Demand in these markets, too, did not begin to recover until the end of the reporting period.

      The degree of fluctuation in stock prices and currency exchange rates or in prices of consumer goods in comparison to the market.