For centuries, steel has been valued for its high-tensile strength and durability and has been fundamental to societal advancement, allowing us to build bridges, railroads, ships, and skyscrapers. Steel manufacturing has seen an increase in capacity, volume, and industry value for many years. However, following the Covid-19 pandemic, production has slowed.
This downturn has been exacerbated by global efforts to move towards more sustainable, carbon-neutral practices, which traditional steel manufacturing does not reflect. Here, we will explore the current hot topics of the industry, how the global market has evolved in recent years, and finally, we consider where it is headed in the future.
Applications of Steel
Steel is one of the most important materials in the world for engineering and construction, and it facilitates the connectivity of the world. Today, steel features in many aspects of our daily lives; it is used in cars, refrigerators, washing machines, trains, weapons, rockets, and even in surgical scalpels. It is difficult to imagine a world without steel.
Hot Topics in Steel Manufacturing
The steel industry is one of the world’s most polluting industries, it accounts for roughly 7% of global carbon dioxide emissions. The world is under increasing pressure to decarbonize its activities in order to meet the goals of The Paris Agreement, established to limit global warming and its negative impacts. Therefore, the steel industry, along with other polluting sectors, must drastically develop new technologies that do not emit carbon dioxide. This must happen in the next 5-10 years.
The industry is currently exploring carbon capture technologies as a strategy for reducing its emissions. Additionally, it is exploring the concept of green steel - the manufacture of steel without the need for fossil fuels. Further to this, steel manufacturers are looking into how to establish a circular economy in order to reach net zero. Research has also highlighted the importance of making effective use of scrap metal. As much as 41% of the steel industry’s emissions could be eliminated by better-embracing scrap metal use.
While these strategies are promising, the sector needs significant investment to make these changes.
As the world looks for ways to reduce its impact on the environment, it is reconsidering its traditional processes. Steel has been around for centuries but its production releases a great number of emissions. Therefore, people are turning to alternative construction methods that are considered to be more sustainable, such as timber construction, which has a lower carbon footprint.
Current Global Market - Steel Manufacturing
In 2020, the global steel market was worth around $1,092 billion. The Covid-19 pandemic greatly impacted the demand for steel, however, as well as the steel industry’s ability to produce and transport steel due to lockdown rules and restrictions on movement. By 2022, steel production had dropped to 158.1 million metric tonnes in June, representing a drop of 5.9% compared with the same month in 2021. China reduced its steel production by 20-30 million tons, and this is not expected to bounce back in 2023.
In 2023, it is expected that steel will make a comeback, although it will not fully recover from the disruption to supply and demand that the pandemic caused. The second half of 2022 reflected reduced consumption, which is expected to carry through to 2023. This year, there will likely be lower revenues for steelmakers.
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The UK was Europe’s biggest steel producer in 2019, producing 7 million tonnes of steel. In the same year, China produced 996 million tonnes. In 2023, demand in Europe is expected to continue to shrink, while demand in China is expected to remain flat. Europe will likely be worse hit due to the looming recession, high energy costs, and reduced consumer confidence.
Future Directions of Steel Manufacturing
While the outlook for the global steel manufacturing sector is slightly gloomy, it is not without important drivers of growth. The growing automotive sector, for example, will likely grow a steady and reliable demand for steel across the globe. The automotive industry is currently experiencing four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connection.
These four trends are interconnected and will accelerate each other. As a result, it is likely that the automotive industry will go through an upheaval. This will influence demand for steel, a key material used for making automobiles. The steel industry, however, will likely need to adopt climate-friendly processes so that it can fully support the automotive sector, which is being driven by a shift from fossil-fueled vehicles to electric.
Automobile manufacturers such as Volvo, Toyota, Volkswagen, Nissan, and Seat have recently announced their plans to reopen manufacturing plans in the EU and in the UK. This will likely boost demand for steel in these locations in the coming years.
Final Thoughts
Finally, it should be noted that global scrap metal recycling is on the up. Experts predict that the volume of scrap metal recycled will grow by 340 million tons between 2023 to 2027. Given the current spotlight on recycling in the steel industry, it is likely that the industry will need to shift to accommodate greater volumes of scrap steel. This will be important to helping the industry reduce its emissions, which should be both its short and long-term goal if it is to align with The Paris Agreement.
Overall, there is hope for the steel industry which was detrimentally impacted by the Covid-19 pandemic. The take-home message is that the steel industry must adapt and shift to climate-friendly processes to continue to thrive.
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References and Further Reading
Ash Jones. (2022). 60% reduction in fossil fuel use if steel scrap is used properly, report claims [online]. Industry Europe. Available at: https://industryeurope.com/sectors/metals-mining/60-reduction-in-fossil-fuel-use-if-steel-scrap-is-used-prope/ (Last accessed January 2023)
EU climate targets: how to decarbonise the steel industry [online]. European Commission. Available at: https://joint-research-centre.ec.europa.eu/jrc-news/eu-climate-targets-how-decarbonise-steel-industry-2022-06-15_en (Last accessed January 2023)
Global Steel Market is projected to grow at a CAGR of 3.9% By 2031: Visiongain Research Inc [online]. VisionGain. Available at: https://www.globenewswire.com/en/news-release/2022/02/03/2378598/0/en/Global-Steel-Market-is-projected-to-grow-at-a-CAGR-of-3-9-By-2031-Visiongain-Research-Inc.html (Last accessed January 2023)
Global Steel Sector Outlook Deteriorates on Lower Consumption [online]. Fitch Ratings. Available at: https://www.fitchratings.com/research/corporate-finance/global-steel-sector-outlook-deteriorates-on-lower-consumption-13-12-2022 (Last accessed January 2023)
Steel Demand Growth to Slow in 2022 as War Threatens Outlook [online]. Bloomberg. Available at: https://www.bloomberg.com/news/articles/2022-04-14/steel-demand-growth-to-slow-in-2022-as-war-threatens-outlook?leadSource=uverify%20wall (Last accessed January 2023)
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