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Outlook

The economic environment remains largely favorable in the 2nd half of 2006. Economic early indicators point to continued solid growth in most regions. As in the previous year, global growth in 2006 is expected to be just over 4%. In the USA, economic growth will be slightly more moderate in the further course of the year. The interest rate increases of recent months are depressing consumer and business spending. Japan's economic recovery is continuing. In the other countries of Asia, in particular China, the pace of growth remains high. In the euro zone, the upward trend will continue for the time being. In Germany, domestic demand is providing increasing impetus. In addition to stronger private consumption, high levels of capacity utilization in industry will also boost expansion investment. High oil and raw material prices continue to be a risk factor for the global upswing.

We expect the following developments on the major markets:

With the world economy remaining robust, we expect the world steel market to grow further. This year, global crude steel output is forecast to increase by around 7% to just over 1.2 billion metric tons. China will continue to be the main driver of this growth, but there are also positive developments in all other regions, both for supply and demand. In the European Union, steel consumption will grow significantly. A further increase in steel imports from non-EU countries can be expected in the further course of the year. With demand remaining strong and raw material and energy costs higher, on July 1, 2006 ThyssenKrupp Steel AG implemented further price increases for quarterly contracts.
The upward trend in the market for stainless steel flat products which started at the beginning of the year will continue. Compared with the weak prior year, global market supply is now forecast to grow by 9% in 2006. The positive trend in the market for high-performance alloys will also continue.
Overall, the global automotive industry remains on an upward track. World vehicle production is expected to rise by more than 2% in 2006 to around 68.5 million cars and trucks. The trend of relocating production operations to Asia and the new EU member states will continue. In North America and Western Europe, production is expected to remain stable. Thanks to continued strong exports, German production will be level with the prior year.
The situation for the mechanical engineering sector remains favorable on the back of the continued strength of the world economy. The prospects for key manufacturing countries have improved for the current year. Based on the good workload situation, the German Engineering Federation VDMA has raised its production forecast for 2006 from +2 to +5%. Prospects have also improved in the USA and Japan.
Market growth in the construction sector is concentrated on the developing countries of Asia as well as Central and Eastern Europe. The construction market is expected to weaken in the USA. There are signs that the recession in the German construction industry will end in 2006.

We expect the generally positive business performance to continue in the further course of the year. For fiscal year 2005/2006 we currently plan sales of €46 billion. Based on the very good performance in the first nine months of fiscal 2005/2006, for the full year we now aim to achieve earnings before taxes – excluding major nonrecurring effects – of around €2.5 billion.