10-08-2017

Asian Steel Watch: Megatrends Shaping the Future of the Steel Industry

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The latest issue of POSRI’s Asian Steel Watch journals highlights global megatrends that stem from the largest steel-consuming industries. Read more on how these trends will continue to impact the steel industry over the next two decades.

The latest issue of POSCO Research Institute’s Asian Steel Watch highlights megatrends that will shape the future of the steel industry. These megatrends, which originate from the four largest steel consuming industries – construction, automotive, shipbuilding and energy – will play a crucial role in steel demand, steel products and steel production process.

Megatrends in the Largest Steel-Consuming Industries

The steel industry has been propelled by four drivers of the steel-consuming industries: urbanization, motorization, globalization and industrialization. These drivers will influence product/investment demand and steel intensity, which refers to steel demand divided by construction investment, in respective industries.

These drivers, a.k.a. megatrends, which are divided into ongoing trends and emerging trends, are those that can be observed over at least 10 years, that have a comprehensive impact on every sector of society, and that deeply and extensively influence technology, society, the economy, politics and the environment.

Megatrends and their impact on the steel industry

Urbanization

Urbanization is the most important trend in the construction industry impacting the steel industry. Closely intertwined with rising population and incomes, the number of urban dwellers has increased to 54 percent of the world’s population in 2015 from 33.7 percent in 1960. Urbanization will further accelerate in the future with rapid industrialization in developing countries and the shift to a knowledge economy in advanced countries. The trend of urbanization will cause global construction investments to rise continuously over the long term. However, the steel intensity of construction investment will continue to decline as there will be a greater requirement for investment in smart and green cities software.

Motorization

One of the major trends in the automotive industry is motorization led by high-income earners and improved road infrastructure. Car ownership rose tenfold from 127,000,000 units in 1960 to 1,262,000,000 in 2015, bolstered by increased household incomes and a relative decline in car prices. Global demand for new vehicles will increase over the long term amid widespread motorization. However, steel content per vehicle is expected to decline as automobile materials become lighter and stronger.

Globalization

Globalization is the most important trend for the shipbuilding industry led by increased trade between countries. The export-to-GDP ratio increased significantly, from 12 percent in 1960 to 30 percent in 2015. Although the oversupply issue will run its course until 2025, the shipbuilding market will grow after 2025 due to the expansion of global trade and rising demand of vessel replacements. Steel intensity by a ship’s tonnage will fall continuously as vessels become larger and lighter. It will further decline with the rise of electric propulsion and unmanned and autonomous ships.

Industrialization

With rapid industrialization, the machinery and domestic appliance industries have sparked global steel demand. These industries relatively have many end-user companies, therefore an individual company purchases a small volume of steel but requires a wide range of steel products.

Forecast of production and steel intensity of steel-consuming industries

Together with these four ongoing megatrends, global climate action and the Fourth Industrial Revolution are the emerging trends that will affect the future of the steel industry. These emerging trends are expected to considerably shift consumers’ needs for steel products. More specifically, demand for high strength and toughness, high corrosion resistance, and high performance in steel will continue to rise.

Global Climate Action

At the 2015 United Nations Climate Change Conference held in Paris, all 196 parties agreed to adopt the Paris Agreement, creating a new framework for coordinated international efforts to tackle climate change. As of August 2017, 195 United Nations Framework Convention on Climate Change members have signed the agreement, 159 of which have ratified it. Under this global climate initiative, the steel industry will continue to develop energy saving and recycling technologies as well as new eco-friendly steelmaking processes.

The Fourth Industrial Revolution

The second emerging trend is the Fourth Industrial Revolution which is accelerating based on key technologies such as the Internet of Things (IoT), big data and Artificial Intelligence (AI). The steel industry will move beyond plant automation, and towards smartization across all processes using smart technologies.

The ongoing and emerging megatrends will change the landscape of the steel-consuming industries and ultimately impact the entire steel ecosystem over the next twenty years.

The Steel Industry Over the Next Two Decades

Over the next two decades, the steel industry will face the following four challenges: slowing steel demand due to decreased steel intensity across major steel-consuming industries; a need for more advanced steel products; upgrading to eco-friendly and smart steelmaking processes; and changes in manufacturing based on the Fourth Industrial Revolution.

For more information, download the full version of POSRI’s Asian Steel Watch journal at POSRI’s official website.

Source: SteelWire

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