The Digitalization Journey of the Stainless and Special Steel Industry
From 18-20th September 2018, the stainless and special steel industry came together in Helsinki to discuss the topic of digitalization in the steel industry. The speaker line-up was exceptional: the CEOs of the three major Western stainless steel producers Outokumpu, Aperam and Acerinox were sitting on stage for a panel discussion!
So what have we learnt? Here is a selection from six speakers:
Outokumpu’s CEO Roeland Baan presented his vision for the company which circles around efficiency and becoming the best value creator. To deliver world-class supply chain management is a strategic objective, already $300M of working capital could be released through new initiatives. As a part of Outokumpu digital transformation strategy, the company is establishing unified tools and processes. Currently, Outokumpu still uses 32 different ERP systems globally. The objective is to move to a single ERP system in the near future. Moreover, Outokumpu is moving into e-commerce for distribution of its finished products as a test. Outokumpu’s approach is multi-channel, platforms being one channel.
Klöckner’s CEO Gisberth Rühl is taking a very bold view on digitalization. In his view, platforms will dominate the New Industrial Revolution which is currently taking place. The battle which will be taking place is between horizontal platforms (such as “Amazon Business” and Alibaba) and industry platforms (such as the Klöckner initiated platform XOM). Growth from Amazon Business is exponential. In some regions, Amazon is already the 6th largest steel distributor. Rühl warned of the threat that Amazon Business will move between steel distributors and the final customers. For medium-size steel distributors and traders, he had a drastic message: “The network digitalises. If you do not digitalise, you will have no business and fail.” Rühl’s declared goal is to bring all commodity sales onto platforms.
Metalshub Managing Director Dr. Sebastian Kreft presented on the digital transformation of the raw materials sales and procurement functions. Most companies have accepted the “digital imperative”, the need to implement digital strategies and technologies to strengthen the competitive position. Dr. Kreft pointed out that Europe is falling behind in “tech” vis-à-vis the USA and China. Value opportunities from Digital in sales and marketing circle around: commercial optimization, productivity, working capital optimization and governance. Four areas are most impacted:
- Processes: Operational processes will be automated, performance analytics will be available in real time
- Tools: Liquidity will concentrate in cloud-based platforms provide liquidity; this will give rise to new commercial strategies
- People: People will require a different skill set but remain the key success factor
- Business models: Sales/purchasing functions will become innovation scouts for new business models
Besides digitalization, the conference focused on raw material markets. In particular, nickel, ferrochrome and molybdenum.
Dr Frank Ehrenberg, SVP Raw Material Procurement & Ferrochrome Sales at Outokumpu, presented an outlook for stainless steel melting and the competitiveness of various nickel bearing raw materials. One of Dr. Ehrenberg’s takeaways was that refined ferronickel has lost its competitiveness; Chinese mills are importing less ferronickel due to availability of Nickel Pig Iron (NPI) at a more attractive value-in-use. At the same time, Western stainless steel mills are using less ferronickel due to availability of stainless steel scrap.
Barry Jackson from the global mining company and nickel producer Anglo American presented a positive outlook on nickel demand. World stainless steel production grew by 7% (YoY) in 2018 and is expected to grow by 4% in 2019 according to SMR. Longer term, Jackson presented scenarios on nickel demand from batteries. Demand will grow from 81kt in 2017 to 595kt Ni in 2027 the base case scenario. Moreover, Jackson pointed out that LME nickel stocks have decreased by 140kt from Jan to Aug 2018 and that the International Nickel Study Group has assessed the nickel market to have been in a deficit of 81kt in H1 2018. Most forecasters continue to see the nickel market in deficit in the coming years.
Barbara Buck, Vice President Sales and Marketing at Climax, discussed molybdenum supply and demand. Molybdenum supply is expected to grow by 1.4% in 2018. Ranked by molybdenum mine production, Climax is globally the largest producer, followed by Codelco, Southern Copper Corporation, Chinese producer JDC and China Moly. Molybdenum demand is expected to grow by 3.7% (YoY) this year, Mrs Buck spoke of a relatively balanced market. She also pointed out that China has stopped releasing moly import and export statistics since May 2018 and that Chinese FeMo tender volumes are a new factor to watch.
To conclude: WELL DONE to Markus Moll and the entire SMR and Fastmarkets team for organizing a high caliber conference which left participants return home with new ideas in their briefcases.