A gaze into the future for the world steel industry

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Book Review: Steel 2050: How Steel Transformed the World and Now Must Transform Itself

Rod Beddows has an immense amount of knowledge and experience about the steel industry and this comes through in this book. He has achieved one of the prime aims he has set out to accomplish: to give a young person just setting out in the sector a primer about the business’s evolution and key ideas for the future.  He does this very well.

I liked the historical material about how the steel industry has reached its current position of being a key supplier to just about every part of the global economy – but with technology and experience having driven down prices so much that the industry today struggles to make any money. There are some good points too about how the industry needs to change: for instance how it has to do better at offering a good service to its customers.

In this book, Beddows has also produced some valuable insights into how steel is used that challenge conventional ways of looking at this. For instance, he analyses  “steel intensity” as it is usually measured. This is done by consulting statistics about shipped material. Steel intensity per person is normally regarded as the total amount of steel in a basic metal form that is used each year in a country by head of population. That fails to give the full picture, says the author. The right way to do this is to count several factors often ignored by the statisticians.

They include steel contained in goods that may be imported. That means the steel is used indirectly by consumers and industry in a specific nation, without anyone in that country ever having seen the metal in a raw form. They also include steel in the equipment used to make the material at whatever plant that made it – and also the steel required for the ships and port equipment needed to transport the metal or the goods that use it to the user.

Counting up the data in this way gives the US, for instance, a much higher “true steel use” per person than is normally thought to be the case. The same sort of calculation depresses the figures for countries such as South Korea or China that produce a lot of steel but which export much of it in goods that contain the material. With the help of reasoning that Beddows lucidly explains in the book, the reader forms a more accurate view of the extent to which a modern economy depends on steel in a number of often invisible ways.

Similar thought processes leads Beddows to play down talk in the industry about whether the world has reached an era of “peak steel”. This is defined as a position where global steel output – after 15 years of often rapid growth driven by rapacious expansion in China – has reached a new period where production and consumption barely increases year on year and may even have reached a plateau. If you look at underlying demand for steel and the goods that contain the material, much of this discussion is nonsense, says Beddows.

At the centre of this argument is his belief that strong underlying demand for the goods that use steel in an important group of 20 countries such as Indonesia, Egypt, Nigeria and Argentina – and which don’t include the BRIC nations of Brazil, Russia, India and China – will drive on world steel production and “true” steel intensity for much of the foreseeable future.

Beddows’ focus is commendably long-term. He is preoccupied not just with looking ahead to the 2050 that is part of the book’s title but often gazes even further into the future to 2100. All this is fine but I believe that for the next 10 years steel use per person on a global basis will expand much more slowly than we have been used to in recent years.  That will pose a lot of difficulties for companies that are struggling to cope with even the current period of low prices and low economic activity.

The chapter on technology is a bit disappointing. It is the eleventh of 12 chapters and looks as if it has been written as an afterthought. Surely there is more going on in the industry in terms of technology than is discussed here.  If the industry is to get out of its very poor financial position, then more companies have to find a way to making steel less of a commodity sold at low prices than is the case now. And surely much of this is to to with technology – used both in the material itself to make it stronger, lighter or easier to fabricate, and also in production. To be fair to the author, he states clearly in chapter 12 that in his view technology isn’t among the most important nine factors – most of which are to do with company organisation and management – that he thinks are the keys to steel industry performance. But I’d question him on this.

Above all I missed some sense of who are the smart players – and also the struggling no-hopers – in an industry full of interesting characters and companies. In particular I wanted to know more about Beddows’ assessment of the Chinese companies that have burst on to the steel scene in the past decade. Are they poorly performing behemoths kept afloat by state handouts? Or do they contain people and new ideas on technology and organisation from which the rest of the industry could learn? Sadly I didn’t get even a whiff of any answers to these questions.

I assume the author decided that to reveal too many details about the people he knows in the industry would be unfair to those who might have confided in him in the past without thinking the material would end up in print with their names attached. I can understand this.  But to leave out just about every colourful detail he might have slipped in robs the book of insights that might have made outsiders keen to read the story of steel and so add to the book’s readership.

This is a good book for insiders to the industry who want an informed view as to where it has come from and where it’s going.  But people not involved with the sector – and who want an account of the ups and downs of the business and which companies and people are likely to be among the winners and losers of the next 10-15 years – may be disappointed.

This book is available from Amazon.

By |November 3rd, 2016|Categories: Observations, Opinion|0 Comments

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