Siemens 2010 Annual Report Download - page 141

113 Report on post-balance sheet date events
114 Report on expected developments and associated
material opportunities and risks
128 Information required pursuant to § () and
§ () HGB and explanatory report
133 Information required pursuant to § () and
§ () no.  HGB and explanatory report
135 Compensation and declaration pursuant to §a HGB
135 Additional information for supplemental
financial measures
138 Siemens AG (Discussion on basis of HGB)
147 Consolidated Financial Statements
261 Additional information

In addition to the common currency of the European Monetary
Union (the euro) other key currencies for Siemens include the
U.S. dollar and the British pound. The start of the first quarter
of fiscal  saw a continuation of the trend that began dur-
ing the middle of the  fiscal year in which the euro
strengthened against both the U.S. dollar and the British
pound. The end of the first quarter of fiscal  was marked
by the start of a significant drop in the value of the euro, al-
though the weakening was greater against the U.S. dollar than
against the British pound. The main reason for this fall in the
euro’s value was the worsening of the sovereign debt crisis in
the spring of  in a number of southern and western Euro-
pean member states of the European Monetary Union, which
required support programs from the International Monetary
Fund and the European Union. Increasing concerns about the
sustainability of the economic upturn in the U.S. and the U.K.,
together with simultaneous robust economic growth in key
European countries, resulted in a rise in the value of the euro
against the currencies of both countries beginning in June
. This trend was reinforced at the end of fiscal  by
expectations that the central banks in the U.S. and the U.K.
would undertake additional expansionary monetary policy
measures.
Our businesses are also dependent on the development of raw
material prices. Key materials to which we have significant
cost exposure include copper, various grades and formats of
steel, and aluminum. In addition, within stainless steel we
have considerable exposure related to nickel and chrome alloy
materials.
The price of copper (denominated in EUR per metric ton)
gained approximately % since the beginning of fiscal ,
and nearly % compared to the lowest values in December
. Prices for copper are pushed both by supply and demand
fundamentals and by speculative influences in the commodity
markets. Prices anticipate that the supply of copper is tighten-
ing. Nevertheless, as copper is produced in multiple locations
and traded, such as across the London metal exchange, the risk
to Siemens is primarily a price risk rather than a supply risk.
Aluminum prices rose approximately % over the past fiscal
year and approximately % since the low values of December
. Aluminum prices have been driven mainly by funda-
men tals, i.e., higher demand and especially rising energy costs,
while speculative elements had only transitional effects on
alu minum prices. As with copper, we see developments in
the aluminum market as posing a price risk, rather than a
supply risk.
Steel prices gained approximately % on rising production in
the current fiscal year and approximately % since the low
levels reported by CRU (an independent business analysis and
consultancy group focused on among other things, the mining
and metals sectors) for April  while demand grew at a
slower pace. Prices in general are pushed upwards by rising
raw material costs, for example, significantly higher costs for
iron ore. The market has seen a series of mini-cycles due to the
combined effects from real demand, restocking in the supply
chain and various premature attempts from steel mills to raise
prices. A new pricing scheme between iron ore producers and
steel mills (switching from annual pricing to quarterly pricing)
is expected to add more flexibility and volatility to steel prices
in the future.
Development of raw material prices (Index: Beginning of fiscal  = )
FY  FY  FY  FY  FY 
225
200
175
150
125
100
75
50
Copper Aluminum (HG) Steel HRC
Source: London Metal Exchange (LME) for copper and aluminum, CRU HRC Germany for steel; cash prices in € per ton.