News Room - SEAISI Articles

Posted on 07 Feb 2023

Message from The Secretary General: Keynote Speech Messages at the 2022 SEAISI Steel Mega Event & Expo

SEAISI had another amazing event in November. This time it is the 2022 SEAISI Steel Mega Event & Expo, an in-person conference and exhibition held from 14-18 November 2022.

During this event, two distinguished keynote speakers provided insights into what is coming and what the industry should do next. They are:

• Dr. Edwin Basson, Director General of Worldsteel Association
• Dr. Karel Eloot, Senior Partner from McKinsey & Company.

Future Megatrends and its Impact on Sustainable Development of the Steel Industry Value Chain

Global steel production rate has increased 10 times since the 1950s. Growth is expected to slow down in the decade ahead.

Similarly, in ASEAN-6 countries, crude steel production has increased 2.7 times from a decade ago. Pig iron production has accelerated rapidly with more blast furnaces being built over the same period. However, the region is still a net importer of steel.

Four megatrends accelerated after the pandemic:

• Climate Change – super megatrend influencing all sectors
• Technological Progress – address issues such as carbon neutrality, wealth inequality and spreading of disease
• Socioeconomic Changes – Demographic shifts such as aging population, bigger role of new generation and shifting of individual behaviours
• Geopolitics – Hegemonic competition to multi-polar world order and energy-tech divide.

With the megatrends triggering an enormous change to the industry, how will the landscape change and what challenges will the steel industry face for the next 30 years?

The post pandemic landscape will see changes brought about by:

• Climate change, which will affect all sectors such as economy, society, politics and technology
• Geopolitical rebalancing impacting supply chain, carbon pricing (and cross border measures) and global trade structure and regional trade

On steelmaking technologies, it is necessary for global steel production to meet both market needs and carbon reduction targets. The 3 routes of steelmaking process to achieve carbon neutrality are:

• BF-BOF to Scrap EAF (challenges are quality inputs and ability to achieve higher quality steel)
• BF BOF to Hydrogen DR EAF (challenges are availability of DR pellets and hydrogen)
• BF-BOF to BF-BOF & CCUS (with commercial feasibility of CCUS a major challenge)

Steel is a key material to the transition to circular economy, which should be a focus are of the industry.

Urban development continues to be a critical area for the steel industry. There are four types of city arche­types, with differen­tiated changes in construction, mobility and energy landscape:

1. Advanced Metropolises (high income, high density) – e.g., New York, London, Paris, Hong Kong
2. Prosperous Low-Density Cities (high income, low density) – e.g., SF, Amsterdam, Brussels, Bonn
3. Expanding Monocentric Cities (low income, high density) – e.g., Beijing, Bangkok, Mumbai, Istanbul
4. Developing Scattered Cities (low income, low density) – e.g., Johannesburg, Manila, Rio de Janeiro

Steel use pattern differ by cities. In developed / high income cities, steel use is expected to be flat in the future, unlike more prominent growth in developing cities.

Dr. Basson foresees that steel demand for construction will continue to grow with its eco-friendliness and easy composition with other materials.

Despite strong competition for light-weight materials, steel maintains its strong advantage with its clean process, recyclability and economic features.

For steel businesses to thrive under rapidly changing urban area and mobility landscape, there is need to consider the megatrends while being able to understand the needs from the demand side, the necessary technologies for the future and understanding of how the value chain/ecosystem evolve.

There is a future for the sustainable and resilient steelmaker, one that is eco-friendly and is a digital producer of smart, green and customised solutions.

The Future Trends in ASEAN Steel Market

Dr. Karel Eloot, Senior Partner of McKinsey & Company spoke about the ASEAN Steel Market and what ASEAN steel players should do. The key trends in the global and ASEAN steel markets are:

• Strong price volatility across 2021-2022
• Growing demand for low carbon steel
• Robust ASEAN steel demand growth contributing to ~40% of net global growth until 2030
• Strong domestic supply expansion

 

2022 was a challenging period of high price volatility due to post COVID demand recovery and increase in energy prices. ASEAN like other regions also faced

• Supply chain disruptions from supply of semis and coking coal from Ukraine and Russia
• Demand disruptions due to weakening economies
• Inflation leading to tightening of monetary policy and weakening of local currencies

With the weakening of China’s economy, global steel demand is expected to be driven largely by ASEAN (23% of global demand increase) and India until 2030.

Many steel investments are emerging in ASEAN, with most coming from China. These capacity expansions are expected to reduce imports reliance from 44 – 35% by 2030.

He forecasted that global demand for low carbon steel to increase exponentially by 2040:

• Global low carbon flat steel demand to grow at more than 15x in the next decade
• Low carbon flat steel demand to represent 15% of total flat steel demand in 2030
• Demand to accelerate to 20% of total in 2040 

 

The strong demand for low carbon steel is expected to be driven by the automotive and construction industry in which the leading global companies have announced their scope 3 commitments to net zero between 2030 and 2050. This unprecedented move has forced global leading steel players to also commit to net zero.

Meanwhile, the ASEAN government are balancing between economic development and decarbonisation.

Winning will require ASEAN steel players to act across 3 main axes:

• Optimise supply chain and ensure strategic material supply security through

• Backward integration
• Long term supply contracts and partnership
• Green partnerships

• Combine the best traditional improvement levers with end-to-end digital enabled transformation

• Half of steel companies are stuck in digital transformation due to these challenges:

• Too high a cost for full deployment
• Lack of short-term benefit for business
• Value from pilot effort is unclear
• Lack of talent and knowledge
• Lack of confidence in scalability of technology

• Steel players are scaling their “triple” digital transformation across Business-Organisation-Technology

• Identify and co-develop fit-for-ASEAN low carbon steel technology opportunities

• Many levers for steel producers to pull across scopes 1-3 with the most feasible being to:

• Source 100% green energy for production
• Improve energy efficiency of existing production and employ CO2-reduced production methods

• ASEAN players need to identify fit-for-ASEAN low carbon steel technology opportunities such as

• NG-DRI+EAF+CC(U)S
• H2-DRI+EAF
• BF-BOF+CC(U)S

There you have them, the key trends and direction and advice from 2 leading global experts for the ASEAN Steel Industry.

I would like to thank both Dr. Edwin Basson and Dr. Karel Eloot as well as all our expert speakers for their sharing and contribution to our members and delegates at the 2022 SEAISI Steel Mega Event & Expo.

 

Stay Healthy. Stay Safe.

See You at SEAISI Events

Source:SEAISI