Annual Report 2005/06 - voestalpine

marKeT environmenT anD
BUsiness perFormanCe
The total crude steel production worldwide
in the past year was 1.13 billion tons. As
compared to 2004, this is an increase of
6.8%, which is slightly lower than the growth
from 2003 to 2004 (just over 9%).
The steel production in China, the country
largely responsible for the increase, went
up from 280.5 to almost 350 million tons in
2005, a jump from about one quarter of the
global market share to just above 30%. With
a share of 17%, the European Union remained
the second largest steel producer,
although the crude steel production in the
EU (25) during the past year was down for
the first time in quite a while. The development
in the individual countries was very
differentiated, but overall, production declined
from 193.4 million tons to 186.2 million
tons mainly because of consolidations
and restructuring.
The continuing dynamic situation in the
Chinese steel industry was again the major
influence on the commodity markets which
showed a significantly rising overall price
trend. Additionally, the massive surge in
energy prices, driven particularly by oil and
natural gas, had a considerable adverse impact
on the steel industry.
After the steel boom of 2004, which led to a
substantial increase of imports, the beginning
of the 2005/06 business year was somewhat
restrained in the flat steel products
sector. High inventory on the part of customers
led to lower demand and new orders that
trickled in sluggishly. As a result, the steel
prices came under pressure, resulting in
significant price declines, especially in the
commodity sector. Europe-wide, steel producers
reacted by lowering production, leading
to a decrease in customer inventory and
a stabilization of the market beginning with
the third quarter of the business year. During
the first half of 2005/06, the difficult
economic environment resulted in slightly
lower prices in the Division Steel as well,
although the decline was considerably less
dramatic than the industry average. After a
stabilization in the third quarter, the fourth
quarter of the business year saw incoming
orders go up substantially.
Because of the boom in the energy sector,
demand in the heavy plate grades sector
(especially for off-shore steel grades and
special grades for sophisticated pipeline applications)
remained stable at a high level.
Overall, the Steel Service Center Group
(custom-made pre-processing) was utilized
to capacity, while the Steel Trading Group
was confronted with weaker demand as a
result of market conditions. Also driven by
Divisional Reports
Annual Report 2005/06
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