While in the first half of the business year 2013/14 the European steel sector was still very subdued, the situation then gradually improved. In particular the fourth quarter of the business year 2013/14 experienced a market recovery due to low customer inventories as well as a pick-up of actual demand. That prices did not keep pace with the increasing numbers of incoming orders is due to the fact that steel production facilities that had been previously temporarily removed from the market were now put back into operation almost concurrently with increasing customer demand so that prices remained unchanged at a low level. In the last quarter of the business year, the development of prices of the most important raw materials for blast furnace-based steel production, ore, coal, and scrap, which were trending downward, had somewhat positive effects, although the decrease in costs was largely passed on to end customers. As a result of the price level for steel products in Europe, which is stable at a low level, changes in inventories viewed over the entire year did not impact prices to any great extent because the speculative element of maintaining inventory was not brought to bear. Although, viewed globally, prices in the past business year in other world regions, particularly in the USA, were considerably higher than those in Europe, nevertheless imports to Europe rose.
With reference to the Steel Division’s most important customer industry, the automobile industry, a differentiated picture emerges over the course of the year. While the export-oriented German premium manufacturers continue to record solid growth rates and record sales, the automobile manufacturers who are focused on the European market still had massive capacity utilization problems, especially, at the beginning of the business year; the latter only experienced a gradual recovery in the course of the year. This positive trend, especially in the compact and sub-compact car segments, is expected to continue in the business year 2014/15.
The white goods and electrical industries were largely stable in 2013/14 despite intense competition. While white goods manufacturers expect a stable production level in the current business year, the electrical industry is counting on slightly rising demand, which, however, will be below earlier expectations because electromobility will not penetrate the market as quickly as previously assumed.
In the past twelve months, incoming orders in the mechanical engineering segment have been volatile and slightly below the previous year’s level. However, the market environment for the new business year is expected to be more favorable. After years of free fall in the construction industry, especially in Southern and Eastern Europe, there are cautious signals of a trend reversal, which should grow stronger in the coming quarters. However, it is still premature to talk about a real recovery.
The customer segment that manifested the most difficult conditions for the Steel Division in the past business year was the conventional energy sector (oil, natural gas). Due to numerous postponed pipeline projects, there were too few orders for heavy plate; however, in terms of quantity, they were more then compensated by higher sales of strip products; as far as earnings are concerned, however, falling back on less attractive segments brought significant losses. The division’s operating result (EBITDA), which was 12% weaker than in the previous year, is due almost completely to this slump in the conventional energy segment. A slow normalization of the global project business in the line pipe segment is expected to occur over the next business year.
