On July 14th Mr. Horst Wiesinger, the president of Austrian consulting company Horst Wiesinger Consulting, was elected as a Chairman of the Supervisory Board of GMK Center.
We seized the opportunity to ask Mr. Wiesinger how the coronavirus crisis has impacted the European steel industry, whether the EU’s decarbonization plan will be delayed and what he would advise for steelmakers, especially Ukrainian ones, in the current environment.
— The European and Japanese steel sector are definitely suffering more than the rest of the world. They are serving the high-end of the quality production like automotive industry. This sector experienced a very strong impact of the coronavirus. For instance, the European and Japanese car production is still 25-30% behind the 2019 sales figures.
China has already recovered from the coronavirus crisis and showing an increased steel production in May and June 2020 — 4% compared to 2019. But Europe is still behind by approximately 25% (in the May/June comparison). If not a second wave will occur, I believe that by mid next year the steel capacity will be back on the 2019 values.
— First of all, we need to decide what the word «overcapacity» means. Obviously, we talk about actual production vs. operable capacity ratio. The capacity decrease in the steel industry is rather expensive due to the intensive capital investment in this sector. So this is one of the main reasons why it is so difficult to decrease any steel capacity.
— No, I do not believe that the EU will postpone the decarbonization. Actually the introduction of new technology and processes would be the most effective alternative for reducing overcapacity.
— This will definitely happen.
— I do not like mentioning specific companies. To become an efficient steel producer, you have to focus on cost reduction (by improving asset utilization) and, what is even more important, quality improvement. Available resources would certainly be helpful, however asset utilization and quality improvement with focus on digitalization are the driving forces for the efficiency improvement. Best examples are POSCO and some European producers.
— Today digitalization is certainly a top trend in the industry. Unfortunately, digitalization is still not widely introduced in the iron and steel industry. However, the most efficient companies are quite digitalized. The PWC study based on the interviews of 157 metals companies’ executives is quite relevant in my point of view. The main conclusions are:
The below figure shows the change of the level of digitalization in the coming years.
— For the Ukrainian steel companies the top priority for improving the efficiency will be the quality improvement and digitalization intensifying.
— The access to iron ore resources utilizing the vertical integration is certainly an advantage. This benefit will not be lost due to decarbonization and increased scrap usage. On a long term (20-30 years), I believe, steel production to be based most likely on a closed recirculation of the scrap (75-80% of the global steel production). To reach this value an appropriate storage of the scrap will be needed (to produce also the highest qualities). This will be, in my opinion, the most severe challenge in the developing of this technology. However, 20-25% of steel production will still need iron ore as a raw material – especially in Europe. Due to this fact there will be still a market for the ore suppliers. The leading ore suppliers – Australia and Brazil – will lose market shares.
— As already mentioned concentration on quality improvement and extended added value chain is the most important recommendation for the Ukrainian steel industry.
— The Russian steel industry invested in the recent years heavily in the improvement of the asset utilization and quality improvement. Again – the Ukrainian steel manufactures have to concentrate on quality improvement especially by improving their actual structure of the equipment and state of the art technologies.
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