agility in metals: the digital transformation of the steel industry in … · 2019-10-03 ·...

Agility in metals: The digital transformation of the steel industry in stormy times

Future Steel Forum Budapest,

Presented by Nils Naujok and Holger Stamm

September, 2019

Strategy&

The global metals landscape has been evolving very quickly in recent years

Source: Strategy& 2

Global

oversupply

Healthy global

economy

Tariffs amid

trade tensions

and CO2

Future

uncertainty

Future Steel Forum 2019 September 2019

Strategy&

Today, a storm is coming and the steel industry is facing dynamic and complex market challenges

Source: Strategy& 3

Global overcapacities and volatility of

global steel markets

Necessary consolidation of the steel

industry does not progress

Raw material and energy prices

volatility

4.5% year-on-year drop in shipment

volumes (EU flat steel products Q1 2019)

Trade frictions and diversion effects

(Trump effect)

Steel industry faces production cuts or

factories closures

Structural challenges of the key

customer industry Automotive

New ways of forward integration,

collaboration and partnerships

CO2 price increase, regulation and

customer demand of CO2 efficient steel

Invests needed in CO2 efficiency, new

assets and digitalization


Strategy&

In order to succeed, metals companies must balance a number of important factors – to weather the storm or to sail the wind

Source; Strategy& 4

Digital Green Steel

New Business

Models


Strategy&

Strategy& carried out an in-depth analysis to better understand the importance of digital strategy for metals players

Source: Strategy& 5

31 steel companies 19 aluminiumLooking at:

• Connected Supply Chain

• Smart Operations

• Digital Customer Access

• Digital Products & Services

• Strategy

• Digital Talent & People

• IT & Technology

• Stakeholder engagement

Strategy& Metals maturity assessment


Strategy&

We placed the companies into four categories depending on where they were in their digital journey

Source: Strategy& 6

approx. 30% approx. 35% approx. 20% approx. 15%

Horizontal

collaboratorsVertical integratorsDigital novices

Digital

champions


Strategy&

Digital champions were the only category of metals players achieving a reasonable level of growth and profitability

1) Average CAGR (2011-2017)

Source: PwC Strategy& “Agility in Metals“, 2018 7

Revenue growth

-1.4%Vertical Integrator

-1.6%Digital Novice

1.5%Digital Champion

-o.8%Horizontal Collaborator

Profitability growth

0.7%Vertical Integrator

-0.4%Digital Novice

14.4%Digital Champion

-2.6%Horizontal Collaborator

Resilience to volatility

Less debt


Strategy&

These players have achieved this by taking the right approach to digital

8

production

organised and

monitored for

efficiency

Integrated

with supply

chains and

customers


Strategy&

The digitization of metals production and the metals value chain leads to a productivity revolution

1) Average CAGR (2011-2017)

Source: PwC Strategy& “Agility in Metals“, 2018 9Vertical Integration Horizontal Integration

Enabler: E2E data availability and analysis & efficient IT and data architecture, Competences and Culture

3D

RFID


Melt shop process modeling

Modelling of temperature development

Big data end-to-end quality control

Predictive maintenance

Real-time Inventory analyticsPredictive price analytics

DemandSupply

E2E logistics visibility Integration into B2B ecosystems E2E supply & demand planning

Proactive demand sensingDynamic real-time inventory management

Strategy&

The path to success has its challenges, but the time to act is now to lock in the competitive benefits of embracing digital

Three guiding principles to embrace on your journey towards becoming a digital champion

10

Create in networks and

partnerships

Start with a digital vision

Embed Digital

into your culture

Performance

Time

Digital Novice

VerticalIntegrator Horizontal

Integrator

DigitalChampion

Source: Strategy&


Strategy&

Digital Champions create new business models in the integrated steel value chainApplication of the business model of …

Future Steel Forum 2019

Source: Strategy& 11

… in the metals industry creates an ecosystem that consolidates and centralizes sales, distribution, and planning for various producers

Supplier in a digital ecosystem

… in the metals industry increases the integration in the customer industry to support the customer with design, development, production planning, and component production

Digital system supplier

… in the metals industry creates a virtual and digital network of partnerships in production, development, and sales

Digital network supplier (conglomerate)

September 2019

Strategy&

The next stage of evolution will be to create a fully-integrated digital eco-systems to significantly increase margins – e.g. the Digital Body Shop…

12

DIGITAL

BODY SHOP

Pressing

Steel

Maker

Engine-

ering

Raw

materials /

recycling

OEM Body

Shop39

25

14

65

585

650

Value Added

(in /ton)

10% margin

(in /ton)

COGS

(in /ton)

Steel price(in /ton)

Productivity

Quality

Margin increase

of up to 16%

Source: Strategy&


Strategy&

… or to become the first ecosystem facilitator for Additive Manufacturing in a disruptive way to play

13

ADDITIVE

MANUFAC-

TURING

NETWORK

Appli-

cation /

Buyers

Metals

Powder

Vendors

Print

Shops

Engine-

ering

Consulting

Machine &

Software

Vendors

Ecosystem

facilitator

3

• Expertise across full AM value chain

• Access to materials and solutions (partners or M&A)

• Ecosystem and platformmanagement

Disrupt

Integrate add. manufacturing

and end-user ecosystems

Solutions

innovator

2

New, creative materials and

services

• Application expertisebeyond materials

• Fitting together disparate technologies

• Wide range of materials and solutions

Expand

Source: Strategy&


Descri

pti

on

Cap

ab

ilit

ies

Material

supplier

1

Providing the highest quality

materials

• Rigorous Innovation and R&D

• Prototyping/ applicationexpertise

Core

Way t

o P

lay

Strategy&

Steel companies need to embrace three key elements for the strategy around “green steel” business models to gain competitive advantageKey elements for green steel business models


Source: Strategy& 14

New business models needed for green steel

(to benefit from advantages

of the EAF- or DRI-route)

EBITDA breakdown of in 2°C scenario

New material battle with Aluminuim due to

better CO2 intensity and

TCO of Steel (as key driver

to compensate weight

disadvantage)

Carbon Intensity (based on Paris 1.7-1,8°C scenario) CO2 Real-time Dashboards

CO2-Transparencyin real-time and on product

level (enabled by digital and

big data technology)

September 2019

Strategy&

Find the right course

Dynamic StrategyDigitization

Alternative

business models

Green Steel

Our agile approach enables steel companies to develop a dynamic, agile strategy (enabled by digital) and to weather the upcoming storm Build on digitization, alternative business models and green steel

15

We combine agile ways of

working with our capability

driven strategy approach

building on digital, business

models and green steel.

Aligning costs and capex

anchors the approach and

needs to be closely aligned

with strategy, capabilities

and operating model

Put down a buoy

Align Costs and Capex


Alternative

business models

Clear the ship for action

Differentiated Capabilities

DigitizationGreen Steel

All hands on deck

Operating Model (incl. capabilities)

September 2019

Strategy&

Weather the Storm or Sail with the Wind?

strategyand.pwc.com

© 2019 PwC. All rights reserved.

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see pwc.com/structure for further details.

Disclaimer: This content is general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Dr. Nils NaujokPartner,

Energy, Utilities & Resources (EUR) Leader EMEA

+49 170 2238 855

[email protected]

PwC Strategy& (Germany) GmbH

Kapelle-Ufer 4, 10117 Berlin

Holger StammDirector,

Digital Operations Strategy&

+49 151 6135 8274

[email protected]

PwC Strategy& (Germany) GmbH

Goltsteinstraße 14, 40211 Düsseldorf

agility in metals: the digital transformation of the steel industry in … · 2019-10-03 ·...

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