Op-Ed: How to navigate emerging challenges in the global steel market

However, the worldwide response isn’t uniform, and some countries are taking a more aggressive stance than others. For instance, President Joe Biden proposed raising import tariffs on steel products imported from China. Yet this may be too little too late for most of the industry, and the next few years are set to be fraught with challenges.

Let’s dive into how organizations can tackle these global challenges and future trends to look out for in the industry. 

What’s on the horizon for the global market? 

One crucial emerging trend is the increasing demand for “green steel.” According to Fortune Business Insights, the green steel market will showcase exponential growth over the next decade, with industry value expected to hit $129.08 billion by 2032.

This is no surprise, as decarbonization is a universal priority across most industries around the world. Sustainability will continue to be a crucial defining factor in organizations’ strategies for the short and long term, particularly as regulations become more stringent on carbon reduction. Notably, increased demand for green steel could shift the location of new outputs to places with lower energy costs, such as the MENA region.

Another key trend to keep in mind is weathering supply chain disruptions with technological approaches. A recent report from McKinsey highlights that economies worldwide will continue to undergo supply chain disruptions due to ongoing conflicts, such as those in the Middle East and other crises. 

That same report also underlines the likely risk of continued imbalance and overcapacity for the steel industry across multiple markets and sectors. More specifically, manufacturers and vendors can expect a slowdown in construction demand, but this may be alleviated by increased demand in the energy and transportation industries. 

Combating challenges through collaboration

Primarily, steel is a regional business, with prices differing across markets. For example, hot-rolled coil (HRC) is roughly below $500 per short ton (st) in Asia, $600 in the European Union, and $700 in the US. However, these price gaps are narrowing due to China’s oversupply of cheap steel. 

Rather than operating in isolation between markets and regions, there’s business promise in nurturing cross-collaboration between steel companies. One interesting proposition is joint ventures with other steel companies to expand portfolios without taking on huge additional costs.

Within the steel space, this collaboration could be in the form of cross-licensing contracts between suppliers and sellers across multiple regions. In fact, this approach has been adopted in Japan and some European countries. One example is India’s JSW Steel’s recent joint venture with Japan-based JFE Steel Corp. 

Mitigating the impact with technology

Although policies and regulations such as tariffs and anti-dumping may alleviate the situation in the short term, relying on state action alone is not enough to overcome this massive challenge. Fortunately, there are long-lasting strategies steel companies can adopt to become more resilient. 

According to a recent report from Boston Consulting Group (BCG), one promising solution is for organizations to shift their focus toward driving efficiency in supplying existing inventory. This means organizations should aim for operational excellence and continuous improvement. 

Technological innovation is at the crux of this approach. Investing in and adopting technologies that bolster resilience, efficiency, and productivity on the factory floor and across the supply chain is the way to go.

For instance, minimizing machine downtime is crucial for optimal operational output. The Internet of Things, which provides enhanced visibility into manufacturing processes, is continuously transforming how factory operators improve efficiency. These interconnected technologies create a streamlined operational ecosystem where disruptions are swiftly mitigated while maximally allocating cost resources.

An example of this in action is integrating solutions such as computer vision alongside machine learning (ML) algorithms. This is becoming increasingly popular among manufacturers. That’s because computer vision yields actionable data to inform automated machine interventions when there’s a risk of failure or disruption. 

These automated solutions and this approach take the heat off organizations so they can boost their efficiency and operational quality without breaking the bank—all by leveraging data collection and analysis. This technology is also crucial for allocating human resources intelligently. This includes assessing functions and roles to identify where automations can be implemented to heighten efficiency. 

Based on the current situation and expected trends, the bottom line is that organizations should prepare for continued volatility in the upcoming decade across the global steel market. Honing a future-proof strategy that can weather the instability, disruption, and fierce competition across the industry is non-negotiable. This will require leaders to carefully innovate existing processes in their supply chains through emerging technologies and align business strategies according to shifting demands as green steel becomes more popular.