Dynamics in the steel industry in the current COVID-19 environment

The steel industry has an impact on global GDP and economic development and cannot be ignored. Especially if we consider its essential role for buildings and infrastructure. Together, these two sectors consumed approximately 52% of the material produced in 2019.

The supply of steel for global construction helps fuel a market valued at approximately $11 trillion and expected to grow to $14 trillion by 2025.

Given the role of steel in the global economy, it is important to understand the perspective factors influencing the sector, as well as steel producers – especially in light of the recent global COVID-19 pandemic.

The steel industry continues to operate at a lower level

Before the pandemic, the global construction industry was forecast to grow by 3.6% in 2020. But despite the fact that the industry continued to operate (albeit at a much lower level of activity) the expected growth was affected. Because governments face the challenge of dealing with growing deficits. And residential and commercial projects are negatively affected by unemployment and negative GDP growth.

Beyond these macro-level trends, it is also important to have information about the dynamics of the many construction companies active in this sector. There are significant regional variations in steel production determined by the economic growth patterns of each country. Indeed, the demand in India and China is significantly higher. And it grows faster than in more mature economies like Germany and the United Kingdom.

Early estimates indicate that, after a decline in 2020, emerging regions will have a faster recovery in 2021 compared to advanced economies.

The effects of the current COVID-19 environment can be mitigated by the recent trend of internationalization in construction and the steel industry. In recent years, in order to combat the increasingly complex and competitive environment in which construction companies operate, there has been a clear tendency to expand on international markets. A process led mainly by European companies. Although Chinese and Korean companies have also recently made significant acquisitions. This allows companies to capitalize on their leading position in the infrastructure sector. To achieve sustainable and profitable growth.

However, the results of the internationalization process have been mixed. And many players found it difficult to adapt their business models to foreign markets.

Progressive urbanization

Beyond the immediate economic volatility currently experienced by the global economy, there are a number of trends that underlie the future demand for steel in the construction sector. At the center of many of these trends is progressive urbanization. And the growth of the so-called megalopolises that have a population of over 10 million inhabitants. A recent example is the proposed development of the Neom megacity in Saudi Arabia. With a planned size 33 times larger than that of New York City. To counteract the potential negative effects of urbanization (high energy consumption, security and environmental pollution, among others). The market focuses more and more on the development of smart buildings. These are structures that use technology-based processes and automatically control the various operations and functions of a building within an integrated management system.

These developments create a significant opportunity for steel producers to develop how steel products can play a role in the buildings and cities of the future. It is no longer enough to think in isolation about the basic material requirements. The material must include the complete thinking, from one end to the other of the life cycle. Starting with the architect’s vision and design thinking until the end of life. Functionally, it is necessary to understand how steel materials can support the key requirements of a smart building, including:

– energy efficiency;

– construction certifications;

– experience of tenants;

– operational improvements.

Steel producers

For steel producers, there are clear parallels with the automotive sector driving innovation in the development of high performance steels (eg high strength steels). These steels address the need for greater strength, formability and weldability. For construction steels, there have already been a series of developments in the field of high-strength steels, which have greatly improved structural performance.

Compliance with the requirements for corrosion resistance and fire resistance also plays a significant role. Focusing on advanced thermo-mechanical controlled lamination processes and innovative lamination technologies.

Article source: https://www2.deloitte.com/global/en/blog/energy-resources-industrials/2020/building-steels-future.html