Asian Steel Watch vol. 5 Press Release (June 2017)
AuthorCheol-Ho Chung,Sojin Yoon
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POSCO Research Institute (POSRI) released the 5th issue of Asian Steel Watch (ASW). This bi-annual English journal is specialized in the Asian steel industry and market.
Asian Steel Watch provides insightful, in-depth analysis of the Asian steel market. In this issue, Asian Steel Watch sheds light on the circular economy under the On the Cover section titled, “Towards The Circular Economy: What It Means to the Steel Industry.” It features interview with HBIS Group Chairman Yu Yong and Special Report on Current Status and Future Prospects for the Japanese Steel Market by the Japan Iron and Steel Federation (JISF). The Featured Article section deals with the Asian stainless market and the decoupling of GDP and steel demand. Finally, the Market Trend and Analysis section conducts A Comprehensive Survey of Steel Demand Forecasting Methodologies and their Practical Application for the Steel Industry.
For the full version, please visit POSRI website (https://www.posri.re.kr/eng/)
Asian Steel Watch Vol.5 covers the following issues in detail:
[On The Cover] “Towards The Circular Economy: What It Means to the Steel Industry.”
How Steel is Helping to Achieve a Global Circular Economy
There is an increasing focus on making products last longer, reusing or mending them, or even remanufacturing them. This new concept has been branded a circular economy where the focus is on reduce, reuse, remanufacture and recycle (4Rs). The steel industry is well placed to contribute to a circular economy and is part of the solution in addressing environmental concerns for many products and services. Key properties of steel (strength, durability, magnetic properties) make steel a key enabler of a circular economy. This article outlines how the steel industry is addressing current environmental issues as well as how regulations can be utilized to generate an overall environmental improvement of products and services.
Improving Sustainable Competitiveness in Preparation for a Circular Economy: The Case of POSCO
In terms of sustainability and a circular economy, steel is not free from environmental concerns, but steel can become a cornerstone for a sustainable circular economy considering lightweighting, long service life, and rich iron ore reserves, Based on whole life cycle, POSCO is applying life cycle assessment (LCA) to develop products from the perspective of sustainable competitiveness and improve their eco-friendliness. Representative products to which LCA was applied include advanced high strength steel (AHSS), Hyper NO electrical sheet, Giga Steel, and PosMAC. AHSS applied to gasoline vehicles reduces vehicle body weight, improving fuel efficiency and reducing greenhouse gas emissions. Motor cores with Hyper NO minimize core losses, thereby improving the power efficiency of home appliances and cut greenhouse gas emissions. In terms of PosMAC and Giga Steel, POSCO is preparing for a low-carbon circular economy through a full life cycle database and third-party certification. Developing “PosMent” with a higher slag content, POSCO is strengthening the circular industry ecosystem and reduce greenhouse gas emissions.
Tata Steel Europe’s Approach to the Circular Economy in a Life Cycle Perspective
Steel has excellent credentials as a sustainable material for a circular economy compared to many other engineering materials, on account of, among other attributes, the very high recycling rates throughout its life cycle. There are nonetheless further opportunities for greater circularity in steel and Tata Steel Europe is one of the several steel companies at the forefront of exploring these opportunities. Links between life cycle thinking, the circular economy, and sustainability are many and are at the heart of Tata Steel Europe’s own journey towards a more sustainable organization. Examples of the company’s activities include its active role in the policy and standards arena, where life cycle and circular economy aspects are increasingly prevalent. Tata Steel Europe’s engagement in other initiatives embraces those with a process as well as a product focus. These include customer- centric approaches in communicating on life cycle environmental performance. This article concludes with a view of future possibilities for steel to further its circular economy credentials and relevance as a sustainable material and how taking a whole life cycle perspective helps tell its story.
Steel in a Circular Economy: Change, Impact, and Prospects
Today a linear “take, make, and dispose” economic model is regarded as reaching its limits. As a sustainable growth model to overcome such limits, a circular economy is increasingly being discussed at the global level. The shift to a circular economy may bring tremendous changes to supply and demand of the steel industry and ultimately its future competitiveness. On the demand side, the falling steel unit requirement of steel-consuming industries, expanding service life of steel products, and falling demand for new steel products will fuel a decline in steel demand. On the production side, however, it provides a chance to take advantage of certain hidden strengths of steel—high-quality, high-quantity recycling. To this end, some challenges should be addressed: improving the purity of scrap and maximizing recyclability; the ease of reuse and remanufacture taken into account from the design stage; and building a cooperative linkage system with steel-consuming industries. To deal with opportunities and threats, the steel industry should ensure circularity of steel to maintain its competitive edge and prove that steel is a competitive material for the circular economy era.
Interview with HBIS Group Chairman Yu Yong on, “Challenges and Responses in the Chinese Steel Industry”
HBIS Group Chairman Yu Yong talked to Asian Steel Watch about his company, the Chinese steel industry and global steel industry. 1) HBIS Group’s business and vision
HBIS Group encompasses over 30 subsidiarieswith 120,000 employees. In 2017, its revenue stood at RMB 306.8 billion andyear-end total assets at RMB 376.2 billion,ranking 221st among the Fortune Global500.Bearing the motto “Assuming the Responsibilityof a National Industry”, HBISmaintains a vision of becoming a highlycompetitive steel company.HBIS pursues the“customer-oriented” sales ideology and thephilosophy that “employees provide the irreplaceablecompetitiveness of a company.”
Its business areas include steel business, non-steel business, finance sector, and overseas business. In the steel business, it holds the largestmarket share in China of steel products forhome appliances and the second-largestmarket share of automotive steel. In the non- steel business, HBIS maintains businesssegments in mining, finance and securities,modern logistics, steel trading, and equipment manufacturing. In the finance sector, It has four subsidiaries—HBIS Finance, HBIS Leasing, HBIS Factoring,and Caida Securities. And in the overseas business, it is ensuring theglobalization of our full industrial chainfrom resources and manufacturing to trading.
2) HBIS Group’s experience in integration and restructuring
HBIS management recognizes that industrialdevelopment must necessarily becomerationalized and mature. To this end, HBIS Group is 1)establishing a modern group managementsystem for strategic managementand control, 2)advancing the steel business with central financial management and control as a breakthrough, 3) pursuing reform through a flattenedmanagement structure with the production, and 4) upgrading product mix by satisfying increasinglysophisticated customer needsand expanding the industrial chain todownstream customers.
3) The Chinese government’s restructuring in the future
The Chinese steelindustry will pursue the following five typesof restructuring: it will 1) coordinate products and customers in linewith government supply-side reform, 2) achieve low-carbon greengrowth, 3) bolster innovation strategiesand improve production efficiency, 4) continue the ideology ofreform and opening and accelerate the globalizationof the Chinese steel industry, and 5) enhanceefficiency through M&A.
4) How HBIS is preparing for strengthening environmental regulations
HBIS has maintained itsdevelopment philosophy of “coexistence ofhumans, steel, and the environment” anddesignated “making green steel for humancivilization” as its environmental protectionideology. It has taken the lead in formulatingand implementing our “Green DevelopmentAction Plan.”
It has investedRMB 16.5 billion toward achieving thisgoal. HBIS has closed obsolete facilities,introduced advanced technologies, andstrengthened environment management. Ithas conducted over 430 energy-saving andemission-cutting projects. Now HBIS is among the leaders in energysaving and environmental protection indicesand has been described as the “cleanest factoryin the world.”
5) Smartization of the Chinese steel industry
Major Chinese steel companies’automation and information levels have reached global standards. The digitalizationrate of their major operation processesstands at over 65% and the ERP rate surpasses70%, demonstrating a sound basisfor smartization. HBIS Group has recentlyemplaced an automation and informationsupport system and made great strides. Some factorieshave been designated as national smartmanufacturing pilot plants.
It is movingforward from traditional manufacturingto smart manufacturing: it will 1) implement smartizationand robotics applications across all processes; 2) build simulation systemsand digital twin systems to reduce the newproduct development cycle; and 3) realize the potential valuein data through the application of next-generationtechnologies and enhancesystem analytics and predictability.
6) Global trade conflicts and the steel industry
The Chinese steel industry has consistentlybeen focusing on satisfying domestic demandrather than encouraging massive steel exports. China was a net steel importer until2005. Steel exports have surged in recentyears as Chinese steel products have gained globalcompetitiveness and have been subject toobjective rules.
Since 2010, the share of exports in Chinesecrude steel production has stabilizedin the range of 7-14%. In 2017, China’s netsteel export ratio (% of crude steel production)stood at only 7.7%. In the future, Chinesesteel exports will demonstrate a gradualand stable trend due to the upgradingof the Chinese economic structure, phasedimplementation of supply-side structural reforms,and maturation of the global market structure.
(Special Report) Kiyotaka Terashima, Managing Director of the Japan Iron and Steel Federation (JISF) tells about “Current Status and Future Prospects for the Japanese Steel Market”
Post-war steel demand in Japan in terms of apparent crude steel consumption experienced three boom periods. Since total fixed capital formation flattened in the 1990s, the expansion in indirect exports has supported the increase in demand. In the pre-Lehman boom period, demand increased mainly in the manufacturing sector, particularly in automobile. Both domestic sales and exports were increasing during the rapid economic growth period, but in the bubble economy period exports declined while domestic sales were increasing.
Steel demand is expected to be pushed down in Japan as housing starts are forecast to shrink further due to the declining population. To cope with this issue, Japan is promoting the formation of more compact cities and the renewal of aging buildings and infrastructure.
The Japanese steel industry needs to closely observe future demand and evolving needs and develop high-quality steel products. The key to the future success lies in the efforts to constantly promote the research and development of high-value-added products and to improve service capabilities in response to the changing requirements in the steel market.
(Featured Articles) 1) The Asian Stainless Steel Market: Trends, Issues and Prospects, 2) The Decoupling of GDP and Steel Demand: Cyclical or Structural?
The Asian Stainless Steel Market: Trends, Issues and Prospects
The stainless steel industry clearly demonstrates the economic emergence of Asia. Stainless steel slab production in Asia surged by 35%p from 42% in 2000 to 77% in 2017. The surge is backed by China, India, and the ASEAN nations. The Asian stainless steel market has five characteristics: 1) high growth potential, 2) influence of China’s NPI mills, 3) growing complexity of nickel market, 4) spread of regulation, and 5) restructuring and consolidation.
The Asian stainless steel industry is facing unprecedented challenges, because it can neither seek growth as ROI and cost advantages are uncertain, nor give up the market due to increasing demand. To overcome such challenges, it should seek both cost competitiveness and differentiated strategies.
The Decoupling of GDP and Steel Demand: Cyclical or Structural?
In the 2000s, global steel demand growth consistently surpassed global GDP growth. The dip in global steel demand after 2012 can be mostly explained by the slowdown in global investment and exports. China shifted its growth strategy from investment and exports to consumption as President Xi Jinping took power in November 2012.
The decoupling of GDP and steel demand will last for the time being on several aspects: global investment and exports, raw materials prices forecast, mega trend (aging populations, the sharing economy and the Fourth Industrial Revolution), and major forecast institutions’ prospects. Just as the decoupling of global GDP and steel demand persisted until China emerged as a new growth engine for steel demand after the early 2000s, there is a possibility that the decoupling will repeat. The global steel industry should prepare for this.
(Market Trend and Analysis) A Comprehensive Survey of Steel Demand Forecasting Methodologies and their Practical Application for the Steel Industry
This article classifies and compiles the methodologies through a comprehensive review of the literature, and then finds clues to enhance the accuracy of steel demand forecasting.
The approaches for forecasting steel demand can broadly be classified into the econometric and intensity of use (IU) approaches.
Econometric approaches are divided into the econometric demand model and vector autoregression (VAR). The econometric approach widely uses a simple single equation or a simultaneous equation to forecast steel consumption, considering that steel demand is affected by macroeconomic variables including GDP, industrial production, trade structure, and economic volatility. The VAR methodology has the merit of avoiding the weakness of econometric demand model that requires forecasts of exogenous variables since VAR assumes all variables in a model are endogenous.
The intensity of use (IU) approaches rose to prominence in the early 1970s when some OECD member countries observed their steel demand fall while macroeconomic indicators grew. The IU approach is a useful concept that attempts to link steel consumption to the technological and structural changes in an economy.
Mathematical methodologies and computational approaches
Hybrid mathematical methodologies seek to enhance predictability based on the grey model, algorithm, and fuzzy ARIMA model. The steel weighted industrial production (SWIP) index is broadly used by worldsteel and other steel associations.
To complement the weakness of top-down macro methodologies which directly predict total steel demand, POSRI is concurrently applying a bottom-up micro methodology to predict demand for 16 steel products and summing them to forecast total demand.
Notes to Editors:
POSCO Research Institute (POSRI) is aleading research instituteheadquartered in Seoul, Korea. Established in 1994, it offers research and consulting especially focusing on steel. However, its research areas are not confined to steel. POSRI conducts research in various fields, including the economy, steel-consuming industries, business, materials, energy, and the environment. POSRI publishes Asian Steel Watch, a bi-annual English journal specialized in the Asian steel industry and market, and Chindia Plus, a bi-monthly Korean journal specialized in China, India and other Asian countries.