1) Including sales with other divisions in the Group
With its branded and special steels, the Steel Division is particularly representative of our Group's core competence. The division's six operating companies produce a wide range of steel products (flat steel and sections, plate, sheet piling, components for roofing and cladding and tailored blanks) at the Salzgitter, Peine, Ilsenburg and Dortmund locations. Especially with regard to flat steel products, the product portfolio is geared to premium steel grades and qualities for use in sophisticated application scenarios.
Shipments and procurement market
During the reporting period, the European steel market was still coping with an imbalance between supply and demand caused by Europe's economic and financial crisis. Following a recovery prompted by the inventory cycle in the first quarter of 2013, demand waned notably again in the second quarter, which was also reflected by falling selling prices. The pronounced capacity underutilization of manufacturers in southern European countries remains a key cause of the extremely unsatisfactory situation. As the beleaguered companies are still supported by the local banks as well as by political measures, the necessary capacity adjustments have not been made to date. The resulting excess supply has had a severe impact on price structures across the whole European market. The fact that the EU remains unattractive for imports by non-member countries is the only pale light on the horizon.
In contrast to the majority of European countries, Germany's steel market is still comparatively robust. The volume of business in the German steel industry, with an actual capacity utilization of 85 % in the first half-year, was relatively sound given the external circumstances. In the period under review, German domestic vehicle production declined by a mere 3 % to a good 2.7 million units despite the ailing West European market. The German construction industry as the largest steel processing sector also proved to be robust and, after weather-induced production declines at the start of the year, reported moderate growth. The economic situation of the domestic steel industry, faced with unsatisfactory selling prices as well as persistently high and volatile raw materials costs, is nonetheless exceptionally difficult.
Due to the economic situation, market developments overall are characterized by an extremely cautious approach adopted by steel processors and traders to managing inventories and the resolve to minimize inventories.
Volatile spot market causes sharp fluctuations in iron ore prices
Sharp decline in prices on the coking coal market
Price fluctuations in metals and ferro-alloys
Downturn in steel scrap prices
Against this backdrop the Steel Division developed as follows:
More detailed explanations on the individual companies
Order intake of Salzgitter Flachstahl GmbH (SZFG) settled at the good year-earlier level in the first half of 2013, and orders on hand were even slightly higher. Crude steel production almost achieved the previous year's figure; shipments benefited from the healthy order book and set a new record high on the back of significant growth. In contrast to satisfactory volume developments, selling prices came under pressure from the negative EU market environment. The downtrend in selling prices over the first three months transmuted into stagnation during the following quarter. Despite the lower selling prices, sales declined only marginally compensated by the increase in shipments. Consequently, SZFG achieved its third best sales result ever for the period but nonetheless delivered another negative pre-tax result for the first half year although, compared with the year earlier period, the result had improved notably due to the temporarily lower level of raw material costs.
In the first half of 2013, the heavy plate market came under the influence of capacity utilization problems in the European plate mills. Consequently, fierce competition triggered a protracted price war. International business saw brisk inquiry activity that did not, however, filter through into more order bookings owing to the aggressive price competition of European and Asian producers.
Against this backdrop, Ilsenburger Grobblech GmbH (ILG) acquired a higher volume of orders in the first six months of 2013 and reported an increase in orders on hand and shipments compared with the yearearlier period. Nonetheless, the lower selling price level caused sales to fall below the previous year's figure. Despite lower input material prices and reduced processing costs, the result before tax was marginally negative.
At the start of the year the capacity utilization of section producers was weak due to markedly reluctant ordering behavior. Stockholding steel trade had covered its requirements at the end of 2012 with volumes that were largely delivered only at the start of 2013. Real demand in core Europe contracted further in the early months of the year as construction investors placed considerable restrictions on awarding projects in response to the unclear economic situation. Order activity only picked up momentum in April. This recovery was, however, accompanied by strong price competition, driven primarily by producers in southern Europe.
In the period under review, order intake and the orders on hand of Peiner Träger GmbH (PTG) fell significantly below the year earlier figures due to demand slumping in the sections business. Available capacity was not fully used for this reason, and the production of crude and rolled steel declined. Due to higher level of internal slab dispatches and delays in deliveries from the year 2012, shipments held steady. Sales fell short of the year-earlier level, pressured by the catastrophic selling prices. Peiner Träger GmbH (PTG) reported one of the highest half-year operating losses in the history of the company. Moreover, an impairment test indicated the necessity of impairment in an amount of € 185.0 million on the assets of PTG.
The global sheet piling market still lacks momentum as political instability in a number of countries has been exacerbated by general economic restraint. Necessary reconstruction measures and investments in port expansions were therefore shelved in many locations. The German sheet piling market is extremely dependent on public-sector investment where the spending policy is limited by budgetary constraints. Projects involving new measures and expansions of the waterway engineering infrastructure have therefore been postponed. The last flood disaster at least prompted swifter spending policies and the realization of long overdue safety reinforcement measures. However, the sustainability of this development remains to be seen.
Starting from a low level, HSP Hoesch Spundwand und Profil GmbH (HSP) reported an improvement in order intake and orders on hand compared with the first six months of 2012. Higher shipment volumes lifted sales. With selling prices remaining unsatisfactory, HSP delivered a loss that was, however, lower than in the previous year's period.
Although weather conditions, that were a strong contributing factor to the poor capacity utilization situation of the construction industry in the first quarter of 2013, no longer played an immediate role, a general delay in advancing projects, and consequently in purchasing of Salzgitter Bauelemente GmbH (SZBE) products, was observed. Competitive pressure from neighboring countries in Eastern Europe continued unabated. Although shipments had risen slightly in early year-on-year comparison, sales fell short of the year-earlier figure due to lower selling prices. SZBE achieved breakeven in earnings before taxes.
In the first six months of 2013, vehicle registrations in Germany declined notably in comparison with the first half of 2012. Eurozone exports were also in sharp decline. As a result, shipments, sales and the pretax result of Salzgitter Europlatinen GmbH (SZEP) did not quite match the year-earlier figures.