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Steel Operation Trends amid the COVID 19 Pandemic: What have ASEAN-6, Australia, South Korea, and Taiwan Steel Industries done to cope with the Crisis?

Posted on 19 February 2021

1. Introduction

Although steel was declared as one of the essential industries in several countries, the COVID-19 pandemic has severely impacted steel demand. The biggest steel-consuming sector with 47% of global steel demand i.e. engineering and construction industry, experienced slowdown — with some construction sites locked down. As those sectors reduce demand for inputs, it impacted steelmakers who experienced a prolonged reduction in capacity of more than 60% from normal times and sustaining at that level remains a challenge with resurgence of COVID-19 across the region.

On the other hand, as reported by Dr. Jun H. Goh from POSCO Research Institute, COVID-19 was not the only issue facing the Steel Industry. The steel industry needs to be aware of the on-going trends (e.g. motorization, urbanization, globalization, industrialization) and new rising trends due to the 4th Industrial Revolution (e.g. hyper-connectivity, new mobility, energy revolution, smart convergence) that will bring changes to the global landscape of steel-consuming industries and steel demand & products.

On top of this, the steel industry may experience supply chain disruptions, especially as a result of struggles of the supply chain business partners that provide raw materials, components, and machinery. It has to prepare for a possible prolonged recovery. Given the unknown variables of how the COVID-19 pandemic may play out and when containment may be achieved, steel industry should expect to brace for a trying period and plan for a recovery that may not arrive for at least one year, given prior crises the industry has experienced. Some steel companies may not be able to address such unknown variables on the outbreak. Typical contingency plans are required to help confirm operational effectiveness.

Because of the impact of the COVID-19, the steel industry is similarly affected as compared with the other economic sectors in the respective / individual countries. The purpose of this paper is actually:

  • To understand what the steel industry is doing during these difficult times and to find learnings that are useful for the other players within steel industry.
  • To recommend key focus areas for the steel industry as the next step.

SEAISI thorough its Technical Committee, comprising members from the reputable steel companies in ASEAN-7 countries (Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) as well as Supporting Member Countries in Australia, South Korea, and Taiwan, has managed to compile the impact of COVID-19 on their respective steel industries in 2020 and the actions (focus development area) that are either ongoing or have been completed to cope with the crisis.

2. Key Learnings from Australia, South Korea, and Taiwan

SEAISI’s supporting countries are represented by large and successful steel mills such as POSCO and Hyundai Steel from South Korea ; China Steel Corporation, Tung Ho Steel Corporation, Feng Hsin Steel, Walsin Lihwa, etc. from Taiwan ; InfraBuild and Blue Scope Steel from Australia. During the pandemic, they were also working on improving themselves in many ways and there are many learnings for the ASEAN steel industry.

a) Tracking Global Trends with R&D Introduction

There is a very clear global trend to move to a carbon-neutral environment. As the global warming situation worsens, the preference for electricity-based and hydrogen fuel cell energy source, over fossil fuel sources are becoming more evident due to carbon-neutral targets.

For example, in South Korea and Taiwan. R&D efforts to build core technology for the electric and/or hydrogen-based vehicles automotive industry is on the way, such as:

  • South Korea

POSCO has been developing several essential and special parts to support the development of electric vehicle for body, chassis, battery pack, traction motor, hydrogen fuel cell, and exhaust system. Similarly, Hyundai Steel has been developing those special parts as well, to be used in their automotive division which is Hyundai Motors.

  • Taiwan

Taiwan Steel Industry currently is developing some key technologies using thin electrical sheets for drive motors in electric vehicles that meet the requirements for lower iron loss, higher magnetic flux and higher strength. At the same time, research on Lithium Battery Materials is being conducted.

So, even during the pandemic, steel companies are not resting and are gearing up to meet the global trends, which will keep them competitive and open them to new business opportunities for the future.

b) Continuing Development of Steel Products and Services for Construction and Architecture Sector

The advanced economic countries have also embarked on the development of steel products / services for construction and architecture sector. This means while businesses are affected by COVID-19, product diversification has been implemented through various types of small-scale production and advanced design.

As an example, the various development of steel and related methodologies will benefit building owners in many ways, so they will able to attract tenants and potential buyers as well as being able to reduce costs. In particular, the overview on the recent developments from those aspects are the following:

  • Australia

InfraBuild has been applying VR/AR building design since 2018 and this is becoming more popular during this period (due to mass gathering restriction). The technology brings experiential benefits to the client, architects and designers and even to construction engineers and builders. With its powerful rendering capabilities, users are able to undertake a virtual walk-through of a three-dimensional space, exploring spatial relationships and visualising finishings, colour schemes and furnishings.

  • South Korea

POSCO continues servicing their customer through its POSCO Solution Marketing methodology and at the same time, developing steel panels for building interior and exterior, called ‘PosArt’ (steel architecture product with high-definition patterns and textures such as marble, wood and fabric).

  • Taiwan

Taiwan Steel Industry is more focused on the development of High-Strength Steel products for construction purposes.

As the construction sector remains the largest steel-consuming sectors, steel companies in Supporting Member Countries are still focusing on adding value to their construction industry customers with more product variety and ways to reduce costs.

c) Development of eco-friendly premium steel products

Not only high-value products have been developed but also eco-friendly products, very much in line with the global trends towards products for a sustainable environment.

The definition of eco-friendly premium steel product is related to the lower emission production (low CO2), high performance (lighter, stronger, etc), and higher safety standards which are mostly used in automotive, shipping, and construction sectors.

In regards to environmental protection, there are trends on advanced steel companies in Australia, South Korea, and Taiwan to produce their premium products by shifting the technology process to be more environmentally friendly e.g. from coal-based technology to hydrogen-based technology for ironmaking, etc.

Those companies who have a high value-added product, have found it necessary to develop the product that in line with the requirements of the needs for sustainability. Customer needs and the upcoming trends for more advanced steel products are rising.

 

d) Shifting and Boosting Operational Activities through Digitalization e.g. AI, Smart Factory / Production, and IoT

Due to COVID-19 Pandemic, all of the Industries are forced for realizing the necessity of digitalization. Companies have become more efficient through the use of technology, due to:

  • Migrant labours travel restrictions are stopping people for finding man-power leading to a labour shortage.
  • Consumers are not getting used to with the technology. Forced work from home, most consumers also getting used to buying and doing things online.
  • Businesses have been affected and it’s a good time for doing a trial run for new technologies.

Advanced steel companies have been starting and become more efficient through the use of technology during the pandemic, such as:

  • Australia: Leveraging and Implementing Industry 4.0 techniques in steel operation.
  • South Korea: Realization of AI-based Smart Factory.
  • Taiwan: Smart Production Technology e.g. Smart EAF, Smart Rolling, etc.

While the industry is affected by COVID-19, steel industry is continuing to improve themselves through digitalization, a necessary step towards being competitive globally.

 

e) Strengthening Environmental Protection and Emission Reduction Technology

Global commitments to climate changes are the force behind the trend towards environmental protection and emission reduction. Global warming is becoming an issue. Scientist has found carbon emission is the problem and there is a global effort to achieve carbon neutrality / to become carbon neutral.

Some advanced technologies to reduce carbon emissions that have been developed are the following:

  • Australia: Build on the existing GREENSTEEL strategy of using electric arc furnaces powered by renewable energy to recycling scrap metal.
  • South Korea: Hydrogen based technology.
  • Taiwan: Renewable energy and energy saving.

In the goal towards becoming carbon neutral, the advanced countries steel industries are also working toward this trend. Similarly, steel industry must also work towards environmental protection and emission reduction

 

3. Steel Operation Updates on SEAISI’s Member Countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam)

Faced with a slump in major demand industries such as automobiles, shipbuilding, and construction, major steelmakers in ASEAN-6 focus on optimizing their production, reducing costs (cost saving and process optimalization), reorganization, digitalization, and seeking government support to minimize the impact of COVID-19 Pandemic.

None of the member countries denied that COVID-19 has severely impacted the Steel Industry in the ASEAN region. Various forms of lockdowns have led to logistics issues led to the inability to distribute goods and shutdown in operations in steel operations and in the steel consuming sectors.

In spite of all the setback, the Steel Industry in ASEAN has continued to move forward. A number action plans are underway, such as:

  1. Energy-saving and process optimization
  2. Restructuration or Reorganization
  3. Digitalization on steel market and supply chain
  4. Customer engagement programme
  5. Research on new product development / steel applications and by-product

 

4. What’s Next for the Steel Industry?

From the explanation above, now it may not so difficult to answer the question of what steel industry must do to cope with short-term challenges while positioning itself for long-term success?

In the short term, it's back to basics for the industry. Cost reduction/saving, improving utilization and margins, reorganization, and maintaining cash flow and customers will be the immediate focus.

However, the ASEAN Steel Industry is urged to upgrade itself and to follow the international market trends (through high value-added product sales). Digitalization is critical in order to improve efficiency and cost reduction in today’s connected world and this will bring more opportunities in the near future.

Technology suppliers have more opportunities to offer cutting-edge technologies to help the ASEAN steel industry step in to the future, especially in the areas of digitalisation, process optimization for efficiency and sustainable operations as well as and cost efficiencies in the areas of energy savings and other areas.

In the short and medium term, governments will continue to invest in public infrastructure projects to stimulate the economy. The Steel Industry should continue to improve itself and to get ready for the new upcoming projects.

 

Source : SEAISI