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Positioned for Strong Recovery: Austrian Metal Industry

September 18, 2009

Austrian Metal Sector to Emerge Stronger From Global Downturn than Entering It 

For the global metals industry, parallels to the 1930’s may be appropriately drawn in looking back over the past twelve months. Yet to borrow a line from Mark Twain, reports of its death have been greatly exaggerated. Things are starting to turn. First, leading US economic indicators pinpointed the peak of the US downturn as March 1 of this year. Whereas Austria may have entered the crisis later, its industries are also stronger. A good example is the huge Austrian conglomerate voestalpine, which has noted that analyst recommendations are quite bullish on its company. This financial flattery is good news not only for voestalpine. It is indicative of the overall Austrian metal industry, which shares many of voestalpine's success factors.

A look at some of voestalpine's recent press releases provides us with some clues to analysts’ views: “voestalpine Abandons Short Working Hours at Linz Site,” “voestalpine Supplies Turnouts for Expansion of Local Transport in the Indian Cities of Delhi and Bangalore” and voestalpine Acquires Mexican Market Leader in Turnouts.”

Three characteristics of how the Austrian metals industry has faced the recession and strengthened its global standing follow:
#1 Strong, tight niches are defined with a long-term view of its market and workforce.
#2 High quality pushes technical limits and shifts paradigms.
#3 Global investments grow market shares.

#1 Strong, tight niches are defined with a long-term view of its market and workforce.

With orders in some markets such as automotive down over 50%, the Austrian metal sector has not been immune to layoffs. However, recognizing the value of their employees, some Austrian firms have gone to great lengths to maintain their workforce by cutting hours and pay for limited periods. Others, such as the conglomerate Andritz , have escaped such layoffs due to having a customer base as diverse as steel-making and power generation.

When things were at their bleakest earlier this year, Andritz' Hydro sector was building key parts of the pumped storage power plant LIMBERG II, which is part of a 365 million Euros contract first awarded in 2006. The division received another major order in July to supply water turbines and generators for two new Austrian hydropower stations for Energie Steiermark. Andritz' fortunes have even changed in the steel sector in September as the firm received major orders totaling 60 million Euros from the Brazilian Usiminas, one of the largest steel producers in South America, related to hot rolled carbon steel and hot-dip galvanized steel strip.

#2 High quality pushes technical limits and shifts paradigms.

Schoeller-Bleckmann Oilfield Equipment AG (SBO) is the only supplier in the world to offer expertise in both the development of specialty high-strength non-magnetic steels for the oilfield industry and metallurgical finishing and production of high-precision components. To a layperson, “non-magnetic steel” may sound like an oxymoron, and it is ironic that Austria has no significant domestic oil industry to speak of. SBO's focus of non-magnetic drillstring components for directional drilling allow multiple wells to be drilled from a single point. The result--greater output with minimal environmental impact--is relevant on a global scale.

#3 Global investments grow market shares.

In a time when plant closures have been commonplace, Austrian firms have been active in acquiring dominant industry players to strengthen their global market share. Andritz Hydro was strengthened by the acquisitions of GE Energy's Hydro business and assets in North and South America. The specialty crane and material handling manufacturer Palfinger acquired the US firms Omaha Standard Group and Automated Waste Equipment, Inc. in the past year. In August, Austrian abrasive products manufacturer Tyrolit acquired Illinois-based Radiac Abrasives, strengthening the global manufacturer's North American presence and widening Radiac's geographic reach.

In order to maintain Austria's strong international position in the metals sector, the Austrian Association MACHINERY & METALWARE Industry is actively engaged with schools in Austria to increase the numbers of apprentices in the their highly skilled field. In 2008, 6,930 apprentices were trained in the machinery and metalware Industry, including a growing number of young women.

Austria's strength in the metal sector is by no means unique to Austria. Examples of defining strong, narrow niches with loyal workforces, focusing on quality to result in products which redefine performance standards, and growing market share through strategic acquisitions can be found in other countries. Yet these attributes are typically prevalent in favorable economic conditions. Rising to the challenge as the Austrian metal sector has done in a global downturn speaks volumes about its current and future strengths.