July 2016
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How Will Steel Evolve in the Future?

By Dan Markham, Senior Editor

As economies mature and become less directed toward infrastructure and more toward consumers, their consumption of steel tends to decrease. Thus the long-term view for steel in developed nations such as the United States, Germany and even China might be considered bearish. But in developing countries in South America, Africa and other parts of Asia, steel use will surge as their economies advance, ultimately doubling global steel consumption to more than three billion tons per year. “There are two important corollaries to this model: global steel consumption will continue to increase in growing populations, and the pattern will be repeated as different countries replace each other as the torch bearer for global steel market growth,” said Accenture Analyst John Lichtenstein, who spoke at last month’s AMM/World Steel Dynamics Steel Success Strategies Conference in New York.

Viewed from that perspective, the ongoing wind-down of China’s rapid growth will be a minor blip on the steel landscape. However, Lichtenstein and the team at Accenture question whether the historical model will continue to play out for steel in the coming decades. Four possible “disruptors” cast doubt on the predictable steel-intensive growth of the next wave of developing countries:
  • Further advancement in steel’s properties;
  • Disruption in manufacturing techniques;
  • The ongoing digital revolution;
  • And the adoption of circular economic principles and practices.

Advancements in the properties of steel products, such as development of high-strength steels, can help the industry retain market share against competitive materials, but that won’t necessarily increase overall consumption on a tonnage basis. The digital revolution is reducing inefficiencies in the steel supply chain and changing manufacturers’ needs. At the same time, additive manufacturing or 3D printing could disrupt the traditional manufacturing process. And the circular economy, which strives to eliminate waste and pollution, goes beyond basic recycling principles to a new shared economic model.

“These developments do not take place in isolation. They are highly interactive and interdependent,” Lichtenstein said. For example, consider the automotive industry, one of steel’s most dependable end markets. The growth of ride services such as Uber and Lyft have upended the traditional public transit market. Urban-focused millennials treat vehicles as less of a personal property item and more of a shared service. In addition, development of driverless, computer-driven cars and trucks, which theoretically will eliminate most accidents someday, may lessen the need for strong crash protection in vehicle designs. Such a change could “potentially render the steel vs. aluminum debate obsolete, as a variety of other materials are used,” he said.

The evolution of emerging economies won’t necessarily follow the same historical pattern as other countries. Pointing to the ubiquity of cell phones in developing countries that never had to install landlines, he noted that technology can allow a country to bypass traditional rungs on the ladder to greater economic prosperity. Moreover, these countries are more likely to discover new disruptors to fix urgent social and environmental problems within their borders.

“Based on our preliminary analysis and models, it’s likely global steel demand is entering a very long period of slow growth, which could conceivably culminate in peak steel by the middle of the century,” Lichtenstein said. The concept of steel consumption peaking on a worldwide basis in the foreseeable future is “extreme, but not impossible,” he added. For the extreme to occur, the world would have to see a widespread movement toward circular economic principles, as well as other advancements in material properties and usage.

Regardless of how it plays out, changes are coming to the steel industry. “The bottom line is, steel companies have to fight today’s battles, but also begin to prepare for tomorrow’s challenges, which will fundamentally change their business models,” Lichtenstein said.
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Tuesday, October 17, 2017