Market environment and business development

      The High Performance Metals Division specializes in the production and processing of high performance materials, customer-specific services such as heat and surface treatments, and additive manufacturing processes. While the division benefited from a very robust economic environment at the start of the business year 2022/23, the momentum gradually weakened in individual customer segments as the year wore on. The tool steel product segment was affected the most by this development due to declining demand in the automotive and consumer goods industries. By contrast, the special materials product segment was boosted by the upward trend in the aerospace industry and in the oil and natural gas sector, which solidified over the course of the reporting period. However, the business year just ended was also shaped by a highly volatile environment with regard to raw material and energy prices. The outbreak of the Ukraine war brought about massive increases not only in the prices of electricity and natural gas, but also in the price of numerous alloys such as nickel. In keeping with common practice, rising alloy costs are passed on to customers based on the rationale that the input materials have become more expensive. The substantial energy price increases in Europe were also largely passed on to customers. However, this was only possible to a very limited extent in connection with exports to overseas markets, where competitors were not exposed to similar hikes in the cost of natural gas and electricity.

      Tool steel

      Orders from the European automotive industry at the start of the business year 2022/23 were good despite automakers’ fairly low production rates. The development of electric vehicles (EVs) in addition to passenger cars with traditional drivetrains boosted demand for machine tools. Yet demand for tool steel dropped a bit in the second half of the reporting period, especially in Germany and France. In North and South America, orders from the automotive industry followed a largely stable trajectory throughout the business year.

      In Asia, the consumer goods industry is the main driver of demand for tool steel. In China, market developments were governed by the measures taken to control the COVID-19 pandemic. While comprehensive lockdowns initially slowed the momentum, the sudden reversal of China’s COVID policies toward the end of calendar year 2022 had an adverse impact on both consumption and industrial production due to massive waves of illness. As a result, the country’s economy did not even begin to recover until late in the reporting period.

      Special materials

      The previous year’s upward demand trend in the special materials product segment continued unabated in the business year 2022/23. The ongoing increase in passenger volumes worldwide gave fresh momentum to the aerospace industry, which is an important customer of the segment. In North America, passenger air travel was already approaching the level prevailing prior to the outbreak of COVID-19. The steps China took to open its economy after the COVID-19 lockdowns also helped to support air travel in the fourth quarter of the business year just ended. Rising passenger numbers in regional air traffic and replacement investments in more efficient types of aircraft drove the build rates of short- and medium-haul planes. Toward the end of calendar year 2022, there was also a noticeable increase in demand for larger, wide-bodied aircraft, yet disruptions in global supply chains had a somewhat dampening effect on aircraft manufacturers’ production.

      The momentum in the oil and natural gas sector continued unabated in the reporting period. The need to accelerate exploration activity in oil and natural gas fields against the backdrop of high energy prices triggered brisk demand for corrosion-resistant special materials. There was little sign of a resurgence in the wind energy segment, however, as lengthy approval procedures and rising construction costs have delayed or adversely affected project implementation.

      Considered regionally, demand in Europe for special materials used in the aerospace industry and the oil and natural gas sector is very encouraging. Order levels for these sectors in North America were also satisfactory. Expanding orders from the oil and natural gas industry benefited the High Performance Metals Division in South America, too.

      High performance metals production

      Capacity utilization at the division’s key production plants during the business year 2022/23 was satisfactory. The manufacturing facility in Wetzlar, Germany, was the only one that had to contend with critically low capacity utilization rates. Here, production cutbacks were necessary because the exorbitant increases in the costs of electricity and natural gas could only be passed on to customers to a limited extent. In addition, restructuring measures were launched in the second half of the business year with the aim of boosting efficiency in the long term. Aside from the production plant in Wetzlar, the special steel plant in Kapfenberg, Austria, was also adversely affected by sharp fluctuations in energy prices. Thanks to a product portfolio that strongly differentiates itself from the competition, however, the division succeeded in limiting the negative impact of these developments on earnings. Moreover, the first smelting tests were carried out at the new Kapfenberg special steel plant during the fourth quarter of the business year just ended, while the steel plants in Sweden and Brazil benefited from substantially lower adverse effects in terms of energy costs.

      Value added services

      The Value Added Services business segment cultivates a global sales and services network. It provides customers with high-quality tool steel grades and also offers services such as mechanical processing, heat treatment, and surface coating. In Europe, demand for tool steel and related services was satisfactory during the business year 2022/23. In North America, this business segment benefited from the improvement in the general economic climate as well as from changes in foreign exchange rates. The facilities in China, by contrast, had to contend with negative effects owing to state-imposed COVID-19 control measures. In all of its key regions, the High Performance Metals Division defined growth projects during the reporting period to consolidate its leading market position.