June 21, 2021

Digitizing the Steel Industry

Like in just about every other sector of the economy, the steel industry faces greater uncertainty as the ripple effect of the COVID-19 pandemic continues throughout the global marketplace. The current situation follows a period of apparent slowdown in the steel industry.

According to Metal Bulletin, steel consumption outside of China has continued to disappoint, falling by 1.4% in 2019 compared with the previous year. Although Chinese steel demand did rise during this period, it still marked a slowdown from the previous year as well.

These market factors, however, provide only the backdrop to an industry primed for digital disruption. During the next several years, steel industry players can expect to see the digital revolution, which is widely apparent in a growing number of markets, occur in the metals markets as well. Here are the reasons why.

Digital Platforms Becoming Market Standard

A simple glance around easily shows that digital technologies are well on their way to infiltrating every aspect of both work and personal lives. Although most of us may see more technology as consumers today, more businesses and entire industries are already migrating to online ecosystems. Steel will be no different.

According to industry expert Richard Oppelt, a principal director for Accenture Strategy, digital technologies are powering online marketplaces and ecosystems in virtually all consumer and industrial markets today.

And their conspicuous success in delivering the value promised by the early dotcoms should serve as a red flag to both producers and distributors in the steel market,” Oppelt writes. “In the not-too-distant future, digitally-enabled commercial platforms will disrupt the existing steel business. It’s a matter of when, not if. Acting now could be the difference between survival and extinction.

"Data will gain more and more value compared to the physical product itself, and the top value creators will stand out from the rest by how effectively they capture and leverage data."

Demand That Order Takers Become Value Adders

Historically, the steel industry has been a simple provider of assets. Producers make and sell steel, period. In today’s digital economy, however, the winners in any industry have to grow beyond being an asset-focused business. Customers are demanding added value throughout just about every marketing, and expectations of what’s acceptable rise on a daily basis.

Dr. Markus Reiffershcheid, vice president of research and development at SMS group, writes about how this will occur through Industry 4.0, which is an “ongoing process capturing the entire network of value creation. It comprises the vertical (internal) and the horizontal value creation chain (from the supplier through to the customer) and will eventually lead to a fundamental transformation of both.”

In order to embrace the opportunity, steel companies will need to find ways to share and access data and systems throughout the supply chain.

Harnessing the Power of Data Will Be Competitive Advantage

Over the last decade, the cost of computational power and data collection has continued to drop. At the same time, technological advancements such as machine learning, artificial intelligence, sensor technology, and data scanners have increased. The result has been a rapid acceleration of data collected throughout plants, facilities and organizations. Although most of that data is not being analyzed and used optimally at this point, the potential lies in wait.

In a McKinsey report, the industry analyst notes, “In the past, the most important driver of the competitiveness and value creation for a metal production company was its structural position on the cost curve. Going forward, data will gain more and more value compared to the physical product itself, and the top value creators will stand out from the rest by how effectively they capture and leverage data.”

Being able to compile comprehensive, accurate data across the supply chain as well as within the company itself has the potential to give steel companies powerful information to make smarter business decisions in terms of asset investments and management as well as labor and resource allocation.

Expectation of Price Transparency

It’s already apparent in the consumer world that price transparency is the expectation today. That expectation will continue to move into the business-to- business environment as well. Steel prices have not traditionally been easy to anticipate as they are determined not only by actual supply and demand, but by forecasted supply and demand.

According to Horacio Falcao, INSEAD senior affiliate professor of decision sciences, and Alena Komaromi, financial services professional, “Price opacity used to be the norm, but the arrival of the internet – with mass information sharing and price comparison sites – changed the consumer world for good.”

Falcao and Komaromi go on to recognize that “although the B2B realm is somewhat more complicated due to the customized nature of the deals, there are plenty of examples of price disclosure in corporate transactions.” This trend will continue within the steel industry in coming years.

Battling Supply Chain Inefficiencies

Conventional steel production and processes can be notoriously slow due to lengthy set-up times, minimum production runs, and inventory management issues. Each stage of the production process has the potential for greater efficiency. The challenge, however, is identifying those areas where the investment in digitization and change will result in the greatest return.

According to World Steel, Industry 4.0 provides the roadmap, which focuses on greater visibility into the supply chain, horizontal integration, and a reduction in work-in-progress and working capital in the form of excess inventory.

Companies must embrace the digital tools available today to reduce lengthy delivery times and become more flexible in terms of order changes and minimum runs. Ideally, a secure means of accessing and adding data throughout the supply chain is created so that there is transparency from raw materials through the customer’s final product.


Digitization of the steel industry is already in the early stages, and once the momentum picks up, there will be no turning back. Producers must find ways to implement needed systems, embrace digital processes, and standardize data collection and analysis in the near future.

According to McKinsey, the stakes are high, “Our research suggests metal producers that harness the full potential of a digital transformation can increase their earnings before interest, taxes, depreciation, and amortization (EBITDA) margins by up to 6 to 8 percentage points.”