Trends№ 1 June 2019
Metals and mining industry: development trends
Given the new market environment, companies are having to expand their strategic horizons, establishing their values by developing differentiated business models and taking a whole series of issues into account. Let us take a look at the key trends that should be front of mind.
Demand for steel
In 2018, China reached yet another peak in steel consumption. It is predicted that the demand for steel in China will not grow any further, but that the country will retain its dominant share of global consumption. A drop in the demand for iron ore in China, the world’s biggest market for maritime trade, due to the rising share of electric steel in production, will inevitably affect overall trade volumes. By 2030, the iron ore market is expected to shrink by 199 mn tonnes to 1,328 mn tonnes.
India and South East Asian countries may double their steel consumption by 2030. The demand for steel in the Middle East and North African countries will also increase markedly.
Diverse forecasts regarding the dynamics of Europe’s car manufacturing and construction industry in 2019 might exert an adverse impact on the region’s market. Business in the US construction industry is quite optimistic despite the rise in steel prices due to the introduction of higher tariffs, so the growth of the metals industry’s output in this country will remain at a comfortable level for the sector.
Long-term development trends in the industry include more stringent environmental rules and, as a consequence, a rise in the number of electric arc furnaces and an increase in the share of electric steel in production. By 2030, the share of electric steel might reach over 40% of the total global output of liquid steel. At the same time, the increase in steel smelting in electric arc furnaces will be accompanied by a rise in the consumption and reduced accessibility of high-quality scrap.
All these factors together create the conditions for stable demand for metallised raw materials: hot briquetted iron (HBI) and direct reduced iron (DRI). The production combination of HBI/DRI + election arc furnaces enables a 70% reduction in emissions compared to the combination of a blast furnace and a convertor. In the long term, the growth of HBI/DRI consumption will require an additional 56 mn tonnes of this product by 2030. China and South East Asian countries will account for the majority of this consumption growth.
The number of trade barriers continues to grow: import duties, quotas and anti-dumping duties on heavy plate, plate slabs, blooms and square billets in the key regions of the EU, USA, Middle East and North Africa, Mexico, Iran and India.
Source: Coface, Deloitte, ISSB, RCG, WSA
TOP-7 key industry trends
1. Reliance on data analysis and artificial intelligence. Companies are investing in technology for data analysis and artificial intelligence in order to use the generated data to make process planning and decision-making more efficient all along the value chain. This can help increase labour safety and productivity, cut costs and improve collaboration with employees.
2. Launch of diversity and equal opportunity programmes. In order to attract qualified specialists capable of hitting digitalisation, automation and innovation goals, companies will have to change their traditional perceptions of the industry as a whole. For this, they will need to work together in recruiting from educational institutions and other online platforms, focus on identifying subconscious prejudices that affect the decision to hire new employees and result in workplace inequality, as well as introducing more flexible work practices.
3. Digitalisation of the supply chain. Companies that can find a solution and build interlinked supply chains will not only eradicate fragmentation of their operating processes but also procure the level of transparency required for a more efficient use of assets and greater operating efficiency and productivity, which will ultimately encourage substantial cost savings.
4. The digital age – risk management. Traditional risk management methods no longer work. Boards of directors and investors expect companies to come up with more long-term approaches not only for analysing existing risks but also predicting new ones. This will be made possible by analysis, combined with a number of artificial intelligence and cognitive analysis tools.
5. A new view of labour relations. In light of digitalisation and automation, the large-scale replacement of one generation with another in the industry and the drop in the number of young people studying subjects associated with metals and mining, companies will need to review their HR strategies. Not only must they take into account the changing nature of labour but also think about how to attract a new generation of employees and adapt workplaces to suit their needs.
6. Disclosure of information about the origin of products. Mining and processing companies are increasingly drawing the attention of conscious consumers who ask about the origin of various goods, from mobile phones to electric cars. Accordingly, the end users of such materials, for instance car manufacturers and technology giants, require that their suppliers observe ethical principles. All these trends support the growth of technologies such as blockchain, which make it easier to trace the origin of goods.
7. Analysis of the links between water and energy use. Water resources are high on the global agenda. After all, organising a stable water supply is one of the most difficult tasks. If energy and water use are managed in conjunction, companies will be able to develop business solutions allowing them to optimise the use of both. Such changes are becoming more and more crucial for those representatives of the sector that are looking to maintain their productivity indicators, reduce public concern and take control of environmental risks.