Four major trends will affect the future development of the global steel industry
As a highly globalized industry, the combined total of direct and indirect steel exports accounts for 40% of global production, which demonstrates the industry's highly globalized nature. Under the dual pressures of rising deglobalization and low-carbon transformation, the steel industry urgently needs to establish a rules-based trading system and differentiated regional strategies to address the impact of carbon barriers and localization policies on fair competition in the international market, and to adapt to the evolving differences among economic blocs in terms of intelligent manufacturing and low-carbon product certification." On August 7, Edwin Basson, Director General of the World Steel Association, made this point in his keynote speech titled "Global Steel Industry Development Prospects and Challenges" at the 14th China International Steel Conference. Against this backdrop, Basson believes that four major development trends spurred by the post-pandemic era will affect the industry's development for decades to come, and steel companies need to carefully formulate differentiated development strategies accordingly.
How will the future of the steel industry develop? To answer this question, we need to analyze the driving factors of industry transformation." Basson said that since 2000, the market share of major players in the international steel market has continued to evolve. Among them, the share of developed economies has shrunk significantly, falling from about 60% of the global steel market in 2000 to 20% today. The industry's growth over the past 85 years has been driven by developing economies. India's contribution has been steadily increasing in recent years. Africa is expected to become a new growth pole in the future. "Currently, global annual steel consumption is about 1.95 billion tons. Pessimistic predictions put it at 2.2 billion tons in 2050, while optimistic predictions are 2.4 billion tons. In any case, an additional 300 million tons of demand is expected in the next 20-27 years. Against this backdrop, at the request of its members, the World Steel Association has assessed four major trends and coping strategies for the future development of the global steel industry." He went on to introduce them: firstly, climate change, which can be defined as a 'super trend' because it affects all other trends; secondly, technological progress, covering automation, digitalization, and carbon reduction technology adjustments; thirdly, socio-economic changes, with developed countries facing aging and population shrinkage, and developing countries facing urbanization migration of young people; and fourthly, geopolitical evolution, with the current international geopolitical complexity intensifying, these changes will impact the global steel industry and supply chain.
Basson pointed out that the core issue of environmental level adjustment is—how much and how much can the steel industry change to achieve low-carbon transformation? "If we take no action, the carbon dioxide emissions from the steel industry will rise from 3.6 billion tons to 4 billion tons by 2050. If we work hard to promote carbon reduction, we may be able to achieve a 20%-40% reduction. Of course, this requires technological innovation, management model transformation, and social collaborative support, including many factors such as clean energy supply, new urban construction, transportation transformation, and circular economy development." He said, "We should all learn and start reusing our products. If we can successfully do all these things, we can be quite optimistic that we will see some carbon reduction benefits in the steel industry in about the next 10 years. Under the baseline scenario, the global steel industry emitted 3.6 billion tons of carbon dioxide in 2019, and an additional 418 million tons is expected by 2040. However, the popularization of electric arc furnace short-process steelmaking technology and the progress of other cutting-edge carbon reduction technologies will promote deep decarbonization of the industry. Electric arc furnaces will help reduce the industry's carbon dioxide emissions. We expect to see more electric arc furnaces in China, because China's Scrap has a large potential for growth, and the carbon reduction benefits brought about by technological progress are more visible. Seeing what is happening in the industry now and the ongoing low-carbon investments, by 2040 we believe we may see a reduction of about 20%, i.e., carbon dioxide emissions will be reduced from 3.6 billion tons to about 3 billion tons.
In terms of technological progress, Basson believes that in the past, the global steel industry was dominated by the blast furnace (BF)-converter (BOF) process, and in the future, three technological routes will coexist: firstly, the scrap-electric arc furnace route (Scrap-EAF), mainly developed in regions with abundant scrap resources; secondly, the natural gas/hydrogen-direct reduced iron-electric arc furnace route (DRI-EAF), relying on natural gas for the medium term and ultimately shifting to hydrogen-driven; and thirdly, the green blast furnace-converter route (BF-BOF), reducing carbon emissions in the production process through technological transformation. He said that although emerging technological routes are emerging, blast furnaces will still play a core role in global steel production, and it is estimated that about 50% of steel will still be produced through blast furnaces by 2050. The industry's low-carbon transformation requires steel companies not only to adjust product quality to meet customer's technological upgrading needs, but also to promote deep decarbonization investment, such as hydrogen ironmaking and carbon capture technology application, to address the emission reduction pressure of the blast furnace production process.
"The type of city determines the differentiation of steel demand." Basson said that based on research on global urban development, the World Steel Association has compiled four main types of urban prototypes and their steel demand characteristics. Firstly, developed metropolises, such as New York, USA, are dominated by high-density high-rise buildings, have well-developed public transportation, and complex energy systems, with an annual per capita steel consumption of about 700 kg (saturated); secondly, prosperous low-density cities, such as Amsterdam, Netherlands, have dispersed residential forms and a high proportion of green transportation; thirdly, expanding modern metropolises, such as Beijing, present a single-center spreading structure in the process of rapid urbanization; and fourthly, developing dispersed cities, such as cities in sub-Saharan Africa, are mainly composed of cheap low-rise buildings, with weak transportation infrastructure and serious power shortages due to aging power grids. This also gives rise to core differences in steel demand among different types of cities. On the one hand, steel consumption in developed cities is stable, and more emphasis is placed on the renewal of existing stock; on the other hand, the per capita steel demand in developing cities will grow strongly, especially in the field of construction steel, and the upgrading of transportation facilities and energy will also bring opportunities for increased demand. Therefore, steel companies need to develop targeted solutions for construction steel, transportation infrastructure steel, and energy facility steel that are suitable for different types of cities.
"Finally, geopolitical evolution is driving a paradigm shift in the supply chain." Basson continued to introduce that the steel industry is undergoing a fundamental shift from a cost-priority global long chain to a sustainability-priority regional resilient network. This change is driven by three key forces: the pandemic exposed the risks of single long chains, carbon tariffs (such as carbon border adjustment mechanisms) and economic bloc trade barriers are reshaping the rules, and the supply security of key materials (such as rare earth and hydrogen) "overwhelms" companies' cost considerations. "These will all have an impact on industry development. On the one hand, the supply chain is facing restructuring, shifting from global procurement to near-market and near-resource capacity layout; on the other hand, technological development is showing differentiation, and regional energy availability and policy differences are driving the coexistence of multiple technological routes such as hydrogen-based steelmaking and scrap short processes. At the same time, the competitive dimensions of global steel companies will also be upgraded, and low-carbon emission product certification may become a new threshold for cross-border competition. From this, it can be judged that the global steel industry will evolve into a multipolar regional system, which requires companies to build differentiated development strategies that adapt to local resource endowments, policy environment, and technological capabilities.
Finally, he suggested that steel companies should: firstly, be good material solution providers, developing lightweight high-strength steel suitable for different city types; secondly, be good intelligent manufacturers, building data-driven digital ecosystems; and thirdly, be good carbon-neutral ecosystem builders, actively building a green value chain from scrap, direct reduced iron to renewable energy.
