A View Into the Future № 3 December 2017
The technology driving change
Innovation requires more than just creative thinking. It also needs materials to help ideas become a reality. Experts warn that technological advances may have a significant effect on the demand for raw materials. In particular, innovative development could lead to demand for an increase in new high-quality steel grades.
In the modern world, the law of the developmental acceleration of history, which states that the speed of human development increases at each period of history, can be observed with the naked eye. Smartphones, which not long ago seemed futuristic, in a few years have become everyday objects. New technology and ideas are constantly introduced around the world, affecting all aspects of human life.
According to the Digital McKinsey Digital russia: new reality report published in July 2017, digital transformation is one of the main factors driving global economic growth. According to the report, in the USA, the expected increase in value as a result of digital technology could reach $2.2 trillion by 2025. In Russia, digitalisation may increase the country’s GDP by 8.9 trillion roubles over the same period.
According to McKinsey, this year humanity has passed the point of no return, with every second person on the planet now connected to the internet. In terms of scale, today’s progress is comparable only to the industrial revolution of the 18th and 19th centuries, which determined the leadership of some countries for their entire subsequent history, emphasises McKinsey. Today, digitalisation is shaping the appearance and structure of the economies of countries and even entire regions. At the same time, technology is fundamentally affecting demand in traditional industries. Some of these trends are still not immediately clear, while others can be predicted with a high level of certainty.
The Decline of The Oil and Gas Era
The most pressing issue for Russia, one of the world’s largest oil and gas exporters, is how long the era of oil and gas will last. A few years ago, its decline was associated with the Peak oil theory, the point at which the maximum rate of extraction of ‘black gold’ is reached, after which the industry is expected to enter into gradual decline. Alexander Novak, Minister of Energy of the Russian Federation, commented at the Russian Energy Week in October: “New technologies are making it possible to extract value practically even from a stone”.
Today, the theory of peak oil demand is widespread. There is no general agreement as to when the peak will be reached. Researchers at The Grantham Research Institute on Climate Change and the Environment believe that it will take place happen in 2020. The World Economic Council has provided an estimated date of 2030; the International Energy Agency and OPEC claim 2040 to be a good bet. And one of the main producers of petroleum, Saudi Arabia, presumes a peak to be not earlier than in the middle of the century.
The most commonly discussed reasons for the change in demand include the increase in energy efficiency, the transition to alternative (greener) energy sources, and the demand for which has been steadily growing in recent years. Examples include: solar batteries, tidal energy, wind power, as well as alternative types of stack effect equipment.
“Even if 50% of electricity demand is supplied by renewable energy, then, in spite of everything, aviation, shipping, petrochemicals, all production processes that require high temperatures, will still require hydrocarbons”.
CEO of Royal Dutch Shell, on the last St. Petersburg International Economic Forum
A reversal of this trend can be expected only with a technological leap within the energy sector. According to Alexander Novak, only with the invention of easily accessible high-volume and very fast batteries could we possibly discuss a peak in demand for hydrocarbons. So far, this technology is not available.
At the same time, advanced technology is driving interest in metals. The most striking example is copper, a vital material for a whole range of industries from mechanical engineering to electronics. In the last 20 years alone, global copper consumption has doubled. In the future, we can expect an even faster growth rate.
The automobile industry, and electric vehicle production in particular, may prove to be one of the main drivers spurring demand. Each electric car requires up to four times more copper than its traditional counterpart, which is used for electrical wiring: 80kg compared to 20kg of copper. For larger vehicles with bigger battery sizes, the requirements are even higher. For example, an electric bus needs about 370kg of copper.
The most metal-intensive branches of modern industry are construction, engineering, and automobile manufacturing. Metal is a vital core material in these industries, because progress is largely dependent on the development of the steel industry. Various attempts to replace ferrous metals in these industries with other materials have proved unsuccessful yet. This is because ferrous metals offer the best value for money. In addition, as the necessary infrastructure for collecting recyclable materials, is already established, these metals can be reused repeatedly. In all traditional industries, progress means reducing the consumption of raw materials and energy costs for the manufacture of products. This leads to an increase in the proportion of high-quality steel grades and alloys with unique properties. According to Worldsteel, in the next 15 to 20 years, the production of ferrous metals is expected to grow at a rate of 1-3% per year. At the same time, new technological innovation will require an increase in the share of new high-quality steel grades and other ferrous metals. Requirements for metal products will be toughened, which could result in some adjustments to manufacturing technology.
Director of the innovative metallurgical Technology scientific and educational Centre at the national university of science and Technology MISIS
Despite flaws of existing electric vehicles (in particular, their long recharging time), experts predict that they will gain widespread popularity (according to Goldman Sachs, sales could increase to 8% by 2030 and 32% by 2040). This is largely due to green policies across the globe – cars with zero emissions are the world’s bet on future. Sales have grown in Asia especially. According to China Daily, in 2016, China purchased 58% of all electric cars sold in the world. As a result, according to the International Copper Association (ICA), demand for copper will increase from its current level of 185,000 tonnes to 1.74 million tonnes in 2027 in the automobile industry alone.
The demand for copper could grow not only from electric cars, but also because of developments in the energy sector. Take the growth in the use of solar panels. Also, without copper, the production of modern smartphones, computers and other electronic devices would be impossible.
In total, according to Wood Mackenzie, while in 2016 copper consumption was estimated at 22.3 million tonnes, then in 2020 it could grow to 24 million tonnes.
However, copper is not the only metal required for modern innovation. In the long run, experts expect to see continued high demand for steel (a change in the structure of sales is also expected, with emphasis on high-quality brands). For example, this will be promoted by the development of non-traditional energy, as mentioned above. After all, a wide application of steel makes it possible. One industrial wind generator requires about 140 tonnes of steel. Increasingly, steel is being used in fundamentally new fields. According to Scott Chubbs, Director of Steeluniversity at the World Steel Association, a real milestone occurred this year: the ‘living steel’ Restello building was completed in Kolkata; in this building, steel has been used in not only the structural construction and ventilation system, but also in the exterior finishing.
For the construction of one industrial wind generator, 140 tonnes of metal are required
In addition, there is growing interest in lithium, cobalt, nickel, aluminium and manganese. According to CRU, in 2016 around 220,000 tonnes of lithium were used in the world, but by 2025 this figure could increase to 450,000 tonnes.
At the same time, the demand for new materials called composites will grow. Their range of uses is expanding every year. As a result, in monetary terms, Markets & Markets estimates the world market of composites in 2016 at $69.5 billion, and in five years it is expected to increase to $105 billion.
One of the main competitive advantages of composites is that they are relatively light, which is important for industries such as the aerospace sector. Lighter weight materials help to reduce fuel consumption, as well as to improve various technical characteristics. In particular, the strength and resistance of composite materials are already greater than those of aluminium. For example, Boeing’s Dreamliner aircraft consists of 80% composite material, in terms of volume, but only 50%, in terms of weight. By comparison, in the early 2000s, these figures were a quarter lower.
It is premature to speak about the victory of composites over traditional materials. However, in some sectors, such as medicine, their use creates new opportunities
The use of polymers and composites in medicine is another good example. Comparatively recently, reusable glass syringes were used everywhere, and now they are only a memory. According to Markets & Markets, in five years, the market share of medical plastics increased fr om $13.9 billion to $21.1 billion. In the future, the production of disposable products, as well as high-tech items, will develop more significantly (prostheses made from polymers can already be developed on 3D printers).
However, to proclaim the triumph of composites over traditional materials would still be premature. In car manufacturing, cheaper steel is used more and more frequently when compared to more expensive composites. High-quality metal grades, as well as innovative processing systems, such as hot forming, enable vehicles to be produced to new designs, with better safety and lower fuel consumption.
Thus, Special Bar Quality (SBQ) products, manufactured by OEMK (part of Metalloinvest), are used in the production of vital parts for the automobile industry, mechanical engineering, shipbuilding and aircraft industries, among others. The main SBQ customers are car manufacturers, including both Russian KAMAZ and AvtoVAZ, as well as Volkswagen, Peugeot-Citroen, Skoda, Daimler and others. These high-quality steel products, which outperform all composites in terms of a number of important characteristics, are used to build transmissions, engines, suspensions, steering systems, high-strength fixing bolts and other components.
Paper Will Survive
However, the most notable example of new technological applications is in portable electronics. If from the 1980-1990s, commuters used to read books, now they are all staring into their smartphones and tablets. Surely, this transition to digital technology must mean the inevitable death of traditional paper? Especially since, apart from various gadgets, paper has to compete with its direct electronic analogues (used, for example, in price tags). However, the reality is not so simple. According to Pöyry Management Consulting, world consumption of paper and paperboard could reach 482 million tonnes per year by 2030. That is, demand for these products could increase by 1.1% annually.
The most notable example of new technological applications is in portable electronics
Paper consumption varies in the main sectors driving demand. The most serious changes are expected in the printing industry, wh ere the demand for paper is expected to go down. This situation is reversed within business communications. It would seem that electronic document management, email, and other digital solutions should lead to a decrease in paper consumption. But the fact of the matter is that volume of business printing is growing. Why? There could be many explanations: some people might prefer to read printed documents; others might be sending documents to printers by habit or by mistake.
The trend in packaging is not yet clear. A survey by Printfuture and Wissler & Partner concluded that there is also a noticeable decrease in demand. Nevertheless, according to Pöyry Management Consulting, the volume of consumption of packaging and container cardboard, as well as sanitary paper, is expected to grow until 2030. This is due to marketing needs, booming e-commerce, and growing consumption of ready- meals and branded consumer goods. However, in this regard, plastic is often the main competitor to cardboard and paper. We will have to wait and see which material will win this race to the top.