2005-2006 Financial Statements and Management Report

14
FUEL PRICE INCREASES
PUSHED UP TRANSPORTATION
COSTS.
We also launched a standard Groupwide supplier management system in the reporting year. Suppliers
throughout the Group are assessed on the basis of standardized methods and criteria. All departments
and employees working with the suppliers are involved in these assessments via an internet-based
supplier management tool. This has also created a supplier database which our companies can access
online.
Oil prices drive up logistics costs
Prices for outsourced road freight services were impacted by the high fuel costs, in particular in Western
Europe. By contrast, we were able to achieve price reductions for road freight services to Eastern
Europe. For general cargo we optimized our market position by concluding framework agreements. Full
loads were increasingly tendered directly on the market via platforms. Rail freights within Germany are
mainly secured by long-term agreements. Costs for international rail freights actually fell. In the area
of air freights, we managed to achieve price reductions through framework agreements. However, this
is being countered by costs for fuel surcharges and security procedures.
Ocean shipping rates for bulk goods, while still high, were lower than the previous year. Container
freights to Asia were favorably priced, but rates for shipments from this region were high. Container
freight capacities to the usa/Canada remain limited and are therefore susceptible to price increases.
With container volumes on the rise, some ports are experiencing difficulties in loading freights efficiently
and cost-effectively.
Energy prices in the reporting period were higher than a year earlier. As demand in Asia continued
to rise, the cost of mineral oil and oil-based products rose dramatically, exacerbated by the production
losses as a result of hurricanes Katrina and Rita. At the same time, prices for natural gas increased by
48%. Our suppliers claimed declining deposits in exporting countries and a revaluation of natural gas
on the market as the reason for this price hike. We also had to accept higher prices for electricity. The
extra costs resulting from the subsidization of renewable energies and combined heat and power plants
as well as the electricity tax made this form of energy more expensive than ever.
The introduction of CO 2 emissions trading was another cause of rising electricity costs. It was not
possible to compensate for the higher prices through the sale of allowances under the emissions trading
system, which ThyssenKrupp joined for the first time in fiscal 2005/2006. Overall, our companies
received allowances for the emission of 18.7 million metric tons of CO 2 per year for the first trading
period (2005–2007). By reducing emissions from production operations and due to rules restricting
the allocation of allowances to the first trading period, we had a surplus of allowances which could be
sold in the emissions trading system. Emissions trading is performed by the Group holding company
in order to utilize synergies and simplify risk management.