steelworks digitalize to cut costs, boost services -...
TRANSCRIPT
Putting Steel In Context
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Steel is a conservative sector, according to
some leading software providers, and until
recently slow to take up the challenges
and benefits offered by computerized
softwares, perhaps due to labor issues and
state involvement in companies. Uptake of
computerized technology has been more
dynamic in the non-ferrous area,
particularly aluminum, considered a
“newer” industry. But with steel and
steelmaking raw materials markets
complicated by acute competition and
world overcapacity, a rush is on to adopt
new technologies and systems. One
software supplier reports growth of up to
30% a year among steel sector customers
in some Asian markets, while another
singles out China as one of the biggest
growth markets for suppliers with Chinese-
language capability.
The mindset is changing in steel.
“Traditionally the only goal in big
steelworks was to produce as much as
possible: last century steelworks seemed
like small villages in themselves,” said
François Eijgelshoven, vice-president,
EMEA of Quintiq, a major software
supplier. Quality and service are now
Steelworks digitalize to cut costs, boost services
Welcome to Platts SBB Insight Steelmakers, metalworks and miners are adopting new digital initiatives to boost productivity, improve services and tailor inventories in an increasingly cost-conscious and consumer-oriented environment. Fierce competition between traditional technology giants including IBM and Microsoft and younger rivals including Google and Amazon to build the infrastructure for the emerging digital economy have brought down costs of services such as secure cloud computing, which are thus rapidly gaining adepts in the steel and metals sector. Despite hackers’ skills, data usage and storage systems are more secure than ever before. There are tales of eastern European steelworks even in recent times offering customers a month’s window for deliveries of certain steel products. In this digital age, such practices are unacceptable. Software systems have come into their own in sales and distribution planning, allowing large numbers of suppliers now to deliver steel on the correct day, or at least to narrow delivery windows down to a week, and to establish the true cost of customers’ orders. Downsizing is part of this game, as software suppliers promise opportunities to keep leaner inventories – which may typically be reduced by 20% via computerization - cut bureaucracy, and inevitably, trim and plan labor requirements to suit companies’ real needs. Insight speaks to some suppliers and users to assess industry trends.
The race is on to achieve leaner operations and prompter deliveries as the cloud revolution boosts data security
Issue 215
16 January 2015
© Steel Business Briefing 2015
Edited by Diana Kinch
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German steel distributor Kloeckner aims to introduce web shops in all country organizations by the end of 2015 and to achieve
more than 50% of its sales on-line by 2019. Photo courtesy of Kloeckner.
Steelworks digitalize to cut costs, boost services
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more important than volumes,
with the focus increasingly on how to
cut steel’s typically long supply chain:
up to 6-8 weeks can be needed for
production alone. “The customer is
more demanding on lead times as
keeping steel stocks is very expensive,
and even more so in aluminum…....
this has led to a rethinking of how we
plan and supply: we need to change
to become demand-driven
organizations.”
It’s around 40 years since software
started to be used in steelworks,
metals works and mines, with
Japanese companies among the
pioneers and frontrunners in the US
and Europe planning business on Excel
sheets and screens. Advances since
then have been manifold: suppliers
today maintain computerization of
steelmaking processes typically gives a
5% productivity gain and 20% costs
savings in inventory management.
Computerization helps producers and
distributors fine-tune qualities, and get
shipments out and deliver on time,
with numbers of correct-day deliveries
having doubled in some cases. It can
help reduce energy usage and even cut
pollution by batching materials for use
in furnaces in an efficient manner. In
mines, truck drivers can adjust ore
stockpile qualities and quantities via
constant monitoring of apps on their
dashboards, and some major miners
use driverless trucks for the same
tasks. Data storage systems are
becoming safer, better protected from
blackouts or hackers with the
increasing use of the cloud as a backup
to avoid loss.
Other major software suppliers to the
sector include SAP, IBM, which offers
some products jointly with JDA
Software Group, and specialist
suppliers Metalogic and Brady
Commodities. In mining, specialist
software system suppliers include
Singularity ONE and, for geological
data analysis, Pitney Bowes and
Leapfrog. Minerals Value Service
(MVS), in which Platts holds an equity
stake, collates time-sensitive market
information, with its internet-based
tool backed up by an extensive internal
database providing a data-aggregation
service to aid users purchase raw
materials, particularly iron ore, more
easily and efficiently.
Establishing the true cost of orders
Software systems have come into their
own in sales and distribution planning.
As IBM and JDA say in the run-up to
the Spring 2015 launch of a new order
fulfilment software: businesses need
“to reveal the true cost of fulfilling an
order – including inventory and labor
costs – so (they) can more responsively
adjust inventory and resource
allocations and execute decisions that
meet and exceed customer
expectations while also serving their
bottom line….. Today there is far too
much guess work, too many static
policies, and no intelligence applied to
the process”. The intention of using
these systems is not to lay people off,
although sometimes this occurs as a
side-effect: but to capture and
synthesize knowledge, which can help
in decision-making, increase efficiency
and save time. →
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The concept of fully-automated mines – which could
be safer and more productive than manned mines – is
no longer science fiction. In recent years remote-
controlled computerized technologies including driv-
erless or “autonomous” trucks have been adopted
and thousands of jobs inevitably lost, with up to 40%
of mine staff affected in some cases, according to
reports by the University of Queensland cited by The
Brisbane Times. Rio Tinto has worked together with
Japanese equipment manufacturer Komatsu and
General Electric to develop trucks which use sensors
such as radar and GPS to navigate from loading units
to dump locations. The image shows autonomous
trucks at Hope Downs 4 mine, where all haul trucks
are driverless. Rio has 54 autonomous trucks at 3 of
its 15 mines in the Pilbara, Western Australia, and
plans to boost this to 150. Rio is also investing $478
million to introduce driverless trains in Pilbara in what
will be the world’s first automated long-distance
heavy-haul rail network. BHP Billiton uses Caterpillar
793F trucks which have carried 225 mt in trials at
Jimblebar mine, WA. According to a University of
British Columbia professor cited by Mining Global
magazine, driverless technology has allowed a 15-20%
increase in output, 10-15% decrease in fuel consump-
tion, and an 8% lowering in maintenance costs among
mining sector users. Vale’s new S11D iron ore project
in Carajas, north Brazil, goes further still: this will be a
truckless mine, replacing trucks with conveyor belts up
to 9 kilometers long, to work together at the 90 mil-
lion mt/year capacity mine with diggers and mobile
crushers. A total of 37 km of conveyor belt will be
installed, linking extraction points with beneficiation
facilities. Vale says S11D’S “truckless” system will save
using 100 trucks, reducing potential diesel consump-
tion by 77% and cutting carbon emissions also by 77%,
to 33,700 mt/year from the potential 146,300 mt/year
at this mine in the ecologically sensitive Amazon re-
gion. Sweden’s LKAB, which also uses driverless trucks
at Kiruna mine, has been a pioneer in its use since
1971 of underground driverless trains to shift ore: the
trains which never actually stop have boosted produc-
tivity. A wireless on-line loading information system
(WOLIS), which automatically weighs each bucket of
ore lifted by loaders, is used to calculate the level of
ore in shafts, enabling the control system to send a
train to the shafts when there is enough ore. WOLIS
was developed by LKAB in cooperation with Kiruna
Soft Center AB, a local supplier.
Photo courtesy of Rio Tinto
Steelworks digitalize to cut costs, boost services
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“Downsizing is part of the
industry,” said Leigh Harrison, one of
the founders of Metalogic, a bespoke
supplier of software to the steel and
metals industry, founded in 2000 as a
result of a merger between Beacon
Computer Services – Metals Division,
and Planmatics PLC and expanded in
2001 with the acquisition of
Kalamazoo’s Stockholder Metals
software division. “We can save 20-30
people in some companies and have
seen no union opposition. We’re
busier than ever: having experienced
steady growth in recent years and with
turnover volumes up about 30% in
2014 compared to 2013 following the
issue of new software during the year
which brought us new orders.”
Part of Metalogic’s success is due to its
specialization in the metals sector. Its
biggest growth area is the Far East, but
the company has systems installed
throughout the world, and at
customers including Nippon Steel,
ArcelorMittal, Tata Steel and
Kloeckner. One of the systems offered
is iMetal, the Metals Industry
Management Information System,
which aims to facilitate sales
quotations, costing, stock planning,
management reporting and other
aspects of stockholder business in a
multi-language interface.
Metalogic also has the advantage of
focusing on the steel distribution sector,
which is adhering rapidly to software
solutions to boost logistics flexibility and
customer service levels in a highly
competitive environment involving
multiple product types. The higher
demand has also coincided with cost
reductions in the softwares available:
“companies are now spending
thousands of pounds, instead of
hundreds of thousands in the past
because of the number of software
houses. Some customers rent our
systems off the cloud or some buy
outright: according to the number of
modules smaller systems can cost
£25,000 or £30,000, while a larger one
could be £1 million, involving a
perpetual licence, training, maintenance,
implementation and support. A big
system could take six months to
implement but could have a 20-year
shelf life. And we roll out updates twice
a year and upgrade all customers.”
Cloud computing: an “irreversible”
revolution
Cloud computing, which centralizes
and boosts the dependability of data
processing and information storage, is
now an “irreversible” major trend in
computer systems, according to IBM.
Companies are starting to move away
from buying traditional hardware and
software products to focus
increasingly on cloud service
businesses. IBM and Microsoft have
recently had annual revenues of
around $4.4 billion from the high-
margin cloud sector, with IBM’s latest
quarterly results showing cloud
revenues soaring 80% year-on-year.
The company’s current $1.2 billion
expansion of its global cloud
computing network to 40 centers
including at 12 new locations could
even fall short of demand. IBM has
operating agreements in this field with
Microsoft, SAP, Tencent Cloud, AT&T
and Intel. Oracle’s revenue from cloud
businesses rose 45% in the three
months to the end of November to
$516 million, and is expected to top $1
billion this year. The scale of this
business is vast: each of Microsoft’s 19
cloud data center regions worldwide is
cited by The Financial Times as being
able to support 600,000 servers.
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Information Systems Conceptual Architecture for Mining. Note: ISA-95 is an international standard for developing an
automated interface between enterprise and control systems. Graphic courtesy of IBM.
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Steelworks digitalize to cut costs, boost services
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Software for hedging: stainless steel is growth area
Software is available not only for physical production, sales and delivery operations, but also for hedging, which has become a more important part of daily life for companies in the commodities sector amid the price volatility provoked by China’s growing influence on world markets over the past 20 years. While more common in the base metals area, hedging is gaining adepts among steel and iron ore companies, particularly among traders that purchase ores, and is set to become increasingly widespread as more commodities exchanges introduce contracts based on steel product prices.
Hedging is gaining prevalence in the stainless steel area, where companies are already managing the price risk of stainless’s base metals components, according to UK-based Brady Commodities, which has offered metals options trading and hedging support to commodities companies since the mid-1980s. “Volatility is a strong driver for people wishing to hedge,” says Brady’s head of risk and derivatives division, Harry Knott. “The market (for this kind of software) is pretty good. Sudden moves in prices can wipe out a month’s profit in one go.”
Brady offers a hedge manager program which calculates the market value of all hedge contracts by automatically uploading market closing and settlement prices into a computerized system at the end of each trading day. This allows validation of margin exposure with individual brokers and indicates if and where savings can be made by offsetting positions, at the same time displaying pricing risk and unhedged positions. The system also provides industry standard calculation methods for all derivatives types required for accounting standards compliance and stores a full forward curve for all commodities.
In an ever more demanding regulatory landscape, computerized systems are seen as more transparent and secure, Brady manager Alison Ellman notes.
Brady says that while the price of a bespoke risk management system for a large organization can run into the millions, the hedge manager solution can be deployed quickly at a fraction of this cost. Some software modules are priced at around £100,000. The company’s biggest competitor is still Excel spreadsheets which are “rather risky for big companies, as there’s lot of room for human error, particularly from deleting information by mistake. Spreadsheets are also often points of audit failure.” Sometimes the costs savings are big enough to cover the software costs within the first three months, Knott says. Customers include Metinvest and Xstrata.
Technology research firm Gartner,
Inc. believes nearly half of all
enterprises will have a hybrid cloud
deployed by 2017. “Chief among the
driving forces behind the adoption of
cloud computing worldwide including
hybrid cloud, are requirements for
businesses and governments to store
certain data locally to comply with data
residency regulations,” IBM says.
“About 100 nations and territories
have adopted laws that dictate how
governments and private enterprises
handle personal data.”
Digitalizing the supply chain
The race to digitalize is on. Top metals
companies worldwide — including
Deutsche Edelstahlwerke GmbH, JFE
Steel, Kaiser Aluminum Corporation and
SSAB Oxelösund — have turned to JDA
to solve problems and bottlenecks in
supply chain and demand management,
planning operations, sales and
distribution, scheduling and material
allocation, and inventory optimization.
Deutsche Edelstahlwerke, which
installed JDA’s Factory Planner program
as far back as 1999, was able after three
months to cut its product throughput
times to less than four weeks from the
previous five and reduce the amount of
work in progress by 20%. Tata Steel is
reported to have increased order
promising accuracy to 85-92% from the
previous 50%, and order booking
efficiency to more than 80% after using
a system developed by i2 Technologies,
acquired by JDA in 2010.
German steel distributor Kloeckner
intends to digitalize its entire supply
chain. This week it launched
kloeckner.i, a group center to
coordinate activities of the company’s
national subsidiaries within the
framework of digitalization. Kloeckner
aims to introduce web shops in all
country organizations by the end of
2015 and to achieve more than 50% of
its sales on-line by 2019. It is
extending its use of electronic data
interchange (EDI) accords with
suppliers – offering a digital alternative
to communication via faxes and
letters. The aim is to “make the supply
chain leaner and faster, reduce
inventory levels and allow us to better
predict customers’ ordering behavior,”
said Kloeckner spokesman Christian
Pokropp. “The sales people can then
focus on customers who need a lot of
advice, and on acquiring new
customers.”
The move was made with customer
consent: “We asked the customers
before we started our digitalization
initiative. More than 50% were
interested in ordering on-line, as they
can order 24 hours a day. This is an
advantage especially to smaller or
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Steelworks digitalize to cut costs, boost services
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midsize customers who don’t have
their own procurement departments,
who want to order in the very early
morning or very late in the evening
when the warehouse is closed. This
means they can spend more time
working on their projects,” he said.
The company last month announced
an EDI with Tata Steel, for which it is a
major product distributor, and hopes
similar accords with other
steelmakers will follow. The electronic
data accord, designed to gain speed
and efficiency in all transactions
between the two companies, has
started in the UK, and will shortly be
introduced in other major European
Union countries and in the US. “The
implementation effort is limited and
helps to prevent errors, therefore
reducing costs,” Pokropp said. New
web shops have already been
introduced in the Netherlands, the UK
and Germany. “Significant efficiency
gains” envisaged from Kloeckner’s
digitalization initiative form part of a
company target to improve its EBITDA
margins from 3.5% in Q3 2014 to
more than 5% by 2017.
IT integration is strategic target at TK
German steelmaker and technology
company ThyssenKrupp last month
announced a major IT consolidation to
reduce costs and improve the quality
and security of data transmissions.
The company signed a seven-year
“triple-digit million-euro” contract
with Deutsche Telekom subsidiary T-
Systems to transfer IT systems and
services previously accommodated in
around 700 data rooms and 11 data
centers to five global data centers
which will provide a standardized IT
platform and data networks to
ThyssenKrupp’s 160,000 employees in
nearly 80 countries. Over 80,000
computer workstations and 10,000
server systems of ThyssenKrupp
worldwide are to be moved to the
cloud, which will also be the source for
employees’ desktop services including
Microsoft Exchange, Microsoft
SharePoint and Microsoft Lync.
Around 100 employees from
ThyssenKrupp IT Services GmbH will
be transferred to the future service
provider. Earlier in 2014,
ThyssenKrupp contracted
telecommunications providers Verizon
and Vodafone to operate its global
wide area network (WAN), again in a
move to reduce costs and introduce
global standards throughout the
system.
“In the future we will work together
in a more connected way as part of an
integrated group,” said Klaus Hardy
Mühleck, Chief Information Officer at
ThyssenKrupp. “We are moving away
from our previous heterogeneous
structures and creating the platform
for a forward-looking, integrated,
business-oriented and secure IT
environment. That will make us more
efficient, more flexible and more
profitable in all areas.” The company
would not be drawn on the size of the
cost savings expected, but pointed
out that IT integration is one of its
strategic targets.
Tube and pipemaker Tenaris, with
production facilities and offices
scattered around the globe, has also
announced plans to invest in a global
data system.
Priorities include working with less
stock
Quintiq, whose sales have been
growing more than 30% a year, even
during the global financial crisis,
started off in the metals arena
supplying systems to aluminum works,
later moving into steel and mining.
Some 30-40% of its sales are from the
steel and metals area. Its products are
designed to help companies solve what
Eijgelshoven calls “the daily
optimization puzzle, which is becoming
larger and more complex,” with many
producers needing to deliver multiple
orders at the same time. “Planners
need tooling to help take decisions.
Not all are looking for productivity
gains because of overcapacity. But
companies need to produce smarter,
and that means to produce using less
stock. We typically allow customers to
reduce stock, on average between 10-
30% less than what they would
normally have, which is good if they
need to finance stock.”
Steelmakers typically “struggle” with
sales forward planning, but software
programs that not only look at a
customer’s history but collate this with
large customers’ forecasts and market
predictions from multiple sources can
make this a lot easier, Eijgelshoven
says. Large companies are typically
more receptive to the introduction of
softwares and models that stand to
boost their competitiveness, reports
Quintiq, whose customers include
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Steelworks digitalize to cut costs, boost services
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steelmakers SSAB, ThyssenKrupp,
Severstal, ArcelorMittal’s Dofasco,
Beltrame in Italy, France and
Switzerland as well as aluminum roller
Alunorf in Germany and Greek
aluminum foil producer Symetal.
Industrial customers typically buy a full
perpetual software licence. The
minimum investment for the software
licence plus installation would start at
“a few hundred thousand, stretching
up to several million euros,” the
software supplier says.
Severstal sees energy savings
Russia’s Severstal expects to save “tens
of dollars” per metric ton of steel on
energy costs with its use of Quintiq’s
optimization software, which will
support direct hot-charging and
immediate hot mill rolling at its
facilities in Russia, instead of the
previous cooling down and reheating
of slabs. Severstal thus plans to
significantly increase its hot-charging
percentage and savings are foreseen
of “several million dollars on energy
costs alone per year” on its annual
production of 11 million mt.
In the aluminum area, major German
remelter and roller Alunorf’s head of
production planning Hubert Bürgel said
the use of Quintiq software has given it
greater transparency within the
business, and the ability to analyze
material inventories, lead times and
deadlines. Results have been quite
dramatic at the works which delivers
more than 1 million metric tons/year of
products to the processing industry.
“With the knowledge we have gained
from using the software, we were able
to reduce our lead times by 50%,
increase shipments by 45% whilst
simultaneously reducing stocks by
about 12%,” Bürgel said. “We also
improved adherence to delivery times
from 40% to 91%.”
German mill suffers cyber attack
Still, mishaps will occur. In December, a
blast furnace at a German steel mill –
whose name was not released to the
press - was reported to have suffered
extensive damage following a cyber
attack on the plant's network,
according to the annual report of the
German Federal Office for Information
Security (BSI).
The BBC cited BSI as saying attackers
used booby-trapped emails, or
phishing, to steal logins that gave them
access to the mill's control systems, and
provoking failure of part of the plant.
By Diana Kinch
What is …
... Stainless Steel?
Good corrosion resistance due to a high chromium
content is the key characteristic. Opinions vary on the
level of chromium (Cr) at which a steel becomes stainless,
but it is at least 10.5%. Nickel (Ni) and molybdenum (Mo)
are often present, and manganese, copper, titanium,
silicon and other alloying elements may be added.
The principal grades are austenitic (typically 16-26%Cr, 6-
22Ni); ferritic (10.5-28%Cr with no/low Ni); martensitic
(higher carbon content than ferritic and typically 12-19%
Cr with low/no Ni); and duplex, a dual-phase austenitic/
ferritic steel (Cr>21%, Ni <8%).
Austenitics are non-magnetic, easily formed, but harden
rapidly during processing (typically used in the process
industries, heat exchangers, cutlery). Ferritics are less
corrosion resistant, easily formed and magnetic (catering,
architectural, materials handling). Martensitics are magnetic,
have higher strength and are less easily worked (surgical
instruments, shafts, fasteners). Duplex is strong with good
impact resistance (desalination, heat exchangers).
Stainless steel was discovered in 1913 by Harry Brearly, a
metallurgist from Sheffield.
For more steel terms go to: steelbb.com > steel
news > steel glossary
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Platts Insight Editor: Diana Kinch [email protected] © Platts 2015 Title photos: Tata Steel, ArcelorMittal.
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