Cover story№ 2 November 2018
Quality and customisation
Globalisation has driven competition in international and domestic steel markets to new heights in recent years and customers make increasingly tough demands on their suppliers. Many foreign markets are now almost impossible to access without quality certification from international supervisory organisations, which impose ever more stringent tests to ensure compliance.
The winners in the new environment will be companies that learn to reduce costs, use new technologies, develop and deliver innovative steel types, and customise products with high added value.
According to Ayrat Khalikov, director of the Centre for Economic Forecasting at Gazprombank, this year both Russian and foreign companies are increasingly competing not for volumes, but for product quality.
Dmitry Maximov, head of marketing at Severstal, confirmed that his company’s investment strategy is now focused on the improvement of the properties of steel products and strengthening of positions in specific segments, rather than on volume increases. Severstal is modernising its production in order to improve quality and expand the product range.
The company is working on new types of premium rolled products for the oil and gas, automobile and engineering industries. These include:
pipe steel for use in tectonic fault zones;
high-strength dual-phase steel and ultra-ductile alloy steel for passenger car bodies;
unique bimetals for automotive components.
MMK is expanding its range of high value-added products. The company’s strategy for the period to 2025 calls for the modernisation and launch of new production lines.
Mechel is working to increase the share of high-margin products in its steel division. The Mechel CEO, Oleg Korzhov, says that the company is developing new steel profiles at its rail and beam mill, and has plans to modernise the production of stainless steel, which offers high margins and could significantly increase revenue in the steel business.
Evraz is also developing its product portfolio, improving the properties of its steels and upgrading customer service in order to strengthen its positions in key segments.
Metalloinvest experts confirm that demand for quality steel grades is on the increase. Customer requests sometimes go as far as the combination of several conflicting requirements in one steel, with an ever greater demand for reproducibility, geometrical characteristics, surface quality and delivery times.
The cost of customisation
Companies do not always disclose how much it costs to develop new steel grades. But the cost can be estimated by analysis of open-access requests for the development of new grades. For example, the ‘Structural steels with ultrafine and nanostructures, methods for their production and processing’ project cost 25 million rouble, and a total of 20.8 million roubles were paid by the Russian nuclear industry for the creation of nanocrystalline hard magnetic alloys using refractory metals.
Cost levels depend on industry requirements. Development of a new special steel for the nuclear power industry is particularly costly: laboratory development of special steel for a VVER-SKD nuclear reactor costs 40 million roubles, and pilot industrial testing and certification will require a further 200 million roubles. These figures are average for the industry.
Source: 4science (platform for business-science cooperation)
Steel is expected to perform more tasks than ever before with less waste and lower processing costs for the customer. Metalloinvest is now focused on improving the properties and expanding the range of its products. The company’s product range is now entirely geared to customer needs, and new grades are developed to match customer orders. The company is researching various promising market niches, where it has long-term competitive advantages and can put production facilities in place for acceptable levels of investment.
Steelmakers are also working hard to reduce product defects. A machine-learning technique developed at Saarland University identifies the microstructure of steel using computers and compares it with an accepted standard, increasing the accuracy of steel quality assessment to 93%. In 2017, Severstal used new quality-control technologies to reduce the defect rate to as low as 0.0005% in steel supplies to the Caterpillar Tosno machinery manufacturer. By the end of 2018 Severstal will introduce a new system for measuring correspondence of products to customer requirements and for preparing recommendations on product improvement. The system developers expect it to reduce customer complaints by 25%.
A multitude of new steel grades (more complex, higher-strength, dual-phase, etc.) are now being introduced worldwide and requirements for ductility and strength are becoming more stringent. While the development of a new steel grade previously focused on a single property, it is now often necessary to improve a number of properties which may not always be fully compatible, for example:
strength, ductility and stampability;
strength and corrosion resistance.
There is great potential for the use of steel in a wide variety of industries. Advances in technology and the expansion of customer geography is opening up new specialised niches. Russian steelmakers are increasingly focused on the specific needs of customers and are ready to design and deliver steel grades with unique properties.
Russian steel customers are keen to buy domestically-produced steel grades that match expensive foreign products in quality. Russia’s Laboratory of Special Metallurgy points out that foreign machine-building plants switched some time ago to use of steels containing boron, while Russian machine-builders are still using more expensive low-and medium-alloy steel without boron. This makes imported steel grades superior to those produced in Russia.
Changeover by Russian steelmakers to lower-cost alloy steel grades containing boron would represent a major breakthrough for the domestic industry. Highly active elements, such as boron, offer properties that substitute the properties of more alloy steel, so the changeover will reduce consumption of expensive and scarce alloying elements (chrome, nickel, molybdenum) without diminishing the technical and operational properties of steels.
Increasing global demand from high-tech industries for metal products with a high degree of processing is another major trend. For many products in aviation, instrument engineering, for the manufacture of structures operating in the Far North, or space machinery, steel with a low contents of gas, non-metallic inclusions and other additives are often needed.
Customised solutions by Russian steelmakers (2017-2018)
1. In early 2018, high-strength steel plate produced by Ural Steel (part of Metalloinvest) was awarded a certificate of conformity by the Russian Maritime Shipping Register, opening up new sales markets for Ural Steel.
2. In the spring of 2018, Evraz launched the production of rails with increased wear resistance, meeting an order by Russian Railways. The rails, which are the first of their kind to be produced in Russia, offer an 8% improvement in wear resistance and gains of 30% in cyclic crack resistance. The Evraz vice-president for sales and logistics, Ilya Shirokobrod, says that the new rails will significantly improve traffic safety and efficiency of operations on sections of the Russian rail network that are subject to extreme loads and other specific challenges.
3. In the spring of 2018, Chelyabinsk Pipe Plant began production of large-diameter pipes using innovative cold-resistant strip (K60 strength class), produced by Severstal. The metal has unique properties that enable retention of impact hardness at extremely low temperatures (-42° C). The pipes will be used in the construction of the Power of Siberia gas pipeline facilities.
4. The Machine Building Research Institute reported in October 2017 that it had developed a corrosion-resistant steel with an unmatched ability to resist destruction and aggressive environments. Specialists at the Institute spent 2.5 years developing the new steel, which is designed specifically for use at gas fields where extracted gas has a high content of H2S and CO2.
5. In December 2017, Severstal began to supply the unique rebar, ArmaNorma (А600С), for work on the Akkuyu nuclear power plant in Turkey, which is under construction by the Russian nuclear engineering company Atomstroyenergo (part of the engineering division of Rosatom state corporation). Up to 32,000 tonnes of the metal will be delivered to Atomstroyenergo by 2019.
There is growing interest in technology for the inclusion of nitrogen in iron-based alloys. Recent studies have shown the advantages of high-nitrogen steels in comparison with alloy steels, which are widely used in industry at present. The new steels could be supplied to the aviation, defence and nuclear industries, which are major consumers of alloy and high alloy steel.
As pointed out by Deloitte, Russian steelmakers are at present mainly focused on large customers in the fuel and energy, transport and mechanical engineering sectors. The domestic steel industry needs to build a communication system in order to encourage demand for steel from small- and medium-sized businesses. For example, in the 1980s, UK demand for steel frames in real estate construction was jeopardised by competition from concrete structures. The British steel industry reacted with a long-term educational programme working with architects and builders to demonstrate the many potential uses of steel.
Dmitry Maximov, head of marketing at Severstal, sees huge potential for greater use of steel in real estate construction in Russia. For example, only 3% of single-storey and 13% of multi-storey buildings in Russia have steel frames. That compares with use of steel frames in the construction of 70% of multi-storey non-residential buildings in the US, according to Tata Steel. Greater use of steel frames in Russia would be a major step towards an increase in volumes.
Metalloinvest is now focused on improving the properties and expanding the range of its products
Metal powders for 3D printers is another promising niche, created by lower prices for printers, development of laser and laserless technologies, and the appearance of software for high-precision printing of large metal products. At present, polymers are more often used for 3D printers (53% of the market), while the share of metal in the world market is 44%. However, as reported by Ernst & Young, demand for metal printing is higher than for polymer (52% vs. 31%) and has been growing faster since 2012, which has powered the development of metal printing technologies and increase of turnover.
The capitalisation of additive production is expected to grow as demand for metal powder increases, meeting the needs of many other industries as well as 3D printing. The company Hoeganaes sold only GBP 200 million worth of metal powder in 2017, but IDTechEx predicts an increase in demand to USD 1.8 billion by 2025. Wohlers Association expects the metal powder market to be worth USD 10 billion by 2035.
3D-printer manufacturers are already reacting to the trend:
GE has acquired Arcam and Concept Laser;
Siemens has acquired an 85% stake in Materials Solutions, which uses additive technologies in gas-turbine manufacturing;
Desktop Metal, which develops 3D printing technology for metal products, has received USD 45 million from BMW, Google and Lowe’s.
The key driver of growth in additive manufacturing is the aviation industry, which is expected to account for 15% of the market, worth nearly USD 2.2 billion, by 2025.
Russia has less than 1% share of the additive technologies market and domestic demand for metal powders for 3D printers is met by imports from Germany and the UK. The powder is purchased mainly by the Russian engineering companies Aviadvigatel and NPO Saturn for gas turbine and engine manufacture and also by Novomet-Perm for the production of submersible centrifugal pumps used in the oil industry. The market potential is obvious, with customers of varying size across many sectors, and large Russian steelmakers are beginning to stake their claims.
The steel industry faces tough times at present due to tariff and trade conflicts. But, at the same time, steelmakers understand the opportunities, which are offered by greater focus on quality and customisation of products.
The trend towards a circular economy also poses new challenges to the industry as the increase in the lifetime of steel products could entail a reduction in demand – however, the emphasis on recycling and durability also creates a number of new opportunities.