Adopting the right digital strategy now can dramatically improve margins – by as much as 16% on a tonne of steel.
The metals industry is facing economic, political and technological disruption, and the combined weight of these forces is the catalyst for a digital revolution among steel and aluminium makers. However, we think that embracing the use of connected machines and sensors with the ability to communicate in real time with suppliers and customers, and refining processes based on data analytics, can lead to a significant increase in productivity in this highly competitive industry.
The challenges affecting the ability of steel and aluminium makers to grow profitably and sustainably are considerable: after strenuous efforts to recover from a recession a decade ago, global over-supply caused a further collapse in prices three years ago. Although the relative health of the global economy has boosted demand again, the market must now deal with the imposition of tariffs because of trade tensions between the US, China and the European Union.
Stricter environmental regulations, volatility in raw materials prices and greater competition from producers in lower-cost economies are also crimping profitability. At the same time, clients want stronger and more durable kinds of steel, more diversified and specialised portfolios of products and grades, and shorter innovation cycles.
Some companies have successfully implemented, on a piecemeal basis, digital changes such as monitoring and analysing temperature data to maximise performance of the furnace, or predictive maintenance in rolling mills. However, the challenge is to build these individual initiatives into a coherent digital business model.
Significant performance improvements and cost reductions can result from a number of digital tools and approaches: from “track and trace” within the steel plant and additive manufacturing, to real-time data sharing with customers on the quality of a coil. Digital champions – companies with an overarching strategy that applies from their production process through to interactions with customers and suppliers – are already seeing the benefits.
Our proprietary analysis shows that getting this digital process right can significantly increase margins, by as much as 16% on a tonne of steel. To reap such rewards, metals companies must work to create a fully integrated digital ecosystem with their suppliers and customers, combining processes and data at every stage, from raw materials to the product.