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Annual Report & Accounts 2012

Market review

In 2012, the development of the steel market in general was reminiscent of the scenario in 2011: a short-term spike in demand in H1 gave way to increasing difficulties in the overall economy of the EU in H2, which precipitated a fall in the demand for and prices of steel and raw materials.

Demand on the world market has shown cyclical growth over the last four years. On the one hand, the problems in certain regions have worsened: the EU debt crisis and the issue of the US national debt in particular continue to have a negative influence on global economic growth and the market for steel.

On the other hand, economic growth in developing countries, a significant proportion of which consists of growth in fixed capital investment, partially compensates for the stagnating demand for steel in a number of developed nations. Thus, we are witnessing a deepening global imbalance: the consumption and, as a result, the production of steel is shifting to developing nations at the same time as a significant proportion of production capacity in developed economies remains idle, which leads to a persistent underutilization of capacity.

Global economic environment

The beginning of 2012 saw economic recovery following weak growth at the end of 2011. Actions taken in Europe with regard to fiscal and credit policies, as well as a relaxing of monetary control in developing nations, strengthened the real sector of the economy and improved the climate in the financial markets. Nevertheless, in the middle of the year, the exacerbation of the debt crisis in Europe and growing concern over the ‘fiscal cliff’ in the US sharply increased tension and uncertainty in the global markets. The decline in direct foreign investment and in demand for export products on the part of the developed world, were manifested in a slowdown in industrial production worldwide. Measures taken by the European Central Bank have improved the situation on the financial markets; however, in the real sector, the trends were bidirectional during the second half of the year. Whereas, in the developing world, the rate of economic growth has gradually increased owing to a renewed influx of capital and an increase in domestic demand, in the developed world, a failure to resolve fundamental economic problems has resulted in a recession. As a result, in 2012 the rate of growth in the world economy slowed in comparison with 2011, from 2.7% to 2.3%.

Real GDP growth

2011

2012

2013E

Sources: The World Bank
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Industrial production growth

2011

2012

2013E

Sources: CRU
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PMI (Purchasing Managers Index), 50 = no change

Russia

China

EU-27

USA

Sources: PMI Markit survey tracker, ISM, China Federation of Logistics & Purchasing, HSBC, Markit Economics
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