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Steeling for disruption

Global steel producers must reinvent themselves as demand growth disappears.

OVERVIEW

How does a $1 trillion industry continue to deliver shareholder value when the fire of underlying demand growth that has sustained it for decades dims? The global steel industry is about to find out.

Disruptive forces including material substitution, premature de-industrialization and the impact of the circular economy will lead to a significant slowing of global demand for steel over the next several decades. There is the potential for “peak steel” by mid-century. What’s more, growth in emerging markets will not be the salvation that the industry expects.

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"Forecasts suggest that global steel demand will grow at only 1.1 percent a year to 2035—down from 5 percent during the first decade of the century."

KEY FINDINGS

Accenture Strategy reveals the reality of future steel demand:

  • A time of disruption. Material substitution battles are not new. What is new is the rate at which new materials and technologies are emerging as well as the speed at which end markets are being disrupted. To win, steel must continue creating lighter, longer lasting products, which means less demand in volume terms.

  • The emerging economy. Momentum is strongest in emerging economies. However, they will reach their steel intensity peak earlier in GDP terms and at lower intensity than the past trajectories of mature economies’ development paths would suggest.

  • Effectiveness of old solutions. While cost takeout, consolidation and forward integration can provide short-term relief, these strategies alone cannot sustain enterprise growth amid slowing demand.

  • Role of customer focus. Customer centricity is no antidote for sluggish demand growth when today’s customers could disappear tomorrow as new ones arise in disrupted markets.



Under “aggressive” circular economy conditions, demand growth could drop to 0.4% annually to reach 1.63 billion tons in 2035.

2017 WORLD ECONOMIC FORUM INSIGHTS

Digital Transformation Initiative

As Mining and Metals companies search for the antidote to stagnant growth, digitization looms as a potential panacea. Potential benefits over the next decade include:

  • More than $320B of value for the industry with a potential benefit of $190B+ for the mining sector and $130B+ for the metals sector

  • CO2 emissions reduction of 635M tonnes

  • 1,000+ lives saved

  • 44,000+ injuries avoided

To find out more about the latest Mining and Metals digital initiatives, from robotics and automation to digitally enabled workers and decision support, read the report that we produced for the World Economic Forum on the Digital Transformation of the Mining and Metals industry.

RECOMMENDATIONS

Early movers will respond to this wake-up call of faltering global steel demand growth by taking these actions:

Identify

Identify how the circular economy will reshape the steel marketplace, which requires greater visibility into the extended value chains for products.

Align

Align product and service innovation around hot growth areas being created by the circular economy.

Invest

Invest and innovate in new lines of business, products and services that add value to the downstream business.

With peak steel looming, the steel industry faces a clear imperative to reinvent not only itself, but also, the entire value chain.

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