Even for POSCO, who received the World Economic Forum recognition as a “lighthouse factory” for its innovative leadership in manufacturing, the 5G network is a new daunting challenge ⁠— but it’s also an opportunity. How?

Asian Steel Watch, the biannual English journal specialized in the Asian steel industry, can provide key insights. ASW vol. 7 addresses central issues surrounding the rise of the 5G network and how the steel industry can create a competitive advantage amid this new technology development. POSCO Newsroom presents Asian Steel Watch, “Shifting Needs for Steel Materials with the Rise of 5G Telecommunications and Smart Cities.”

On April 3, 2019, former Olympic figure skating champion Yuna Kim became the world’s first 5G subscriber. If we consider history to be about the conquest of materials by human beings, the advent of 5G technology heralds an era in which humans finally transcend time. We can now overcome any lag in the receipt or transmission of information anywhere around the world. 5G networks are not yet fully operational, and the effects of 5G technology are still being realized, but it will not take much longer before subscribers are enjoying full-fledged 5G services.

On June 27, 2018 when South Korea and Germany faced off in a World Cup match in Russia, shouts rose up in Seoul four times due to the time lag: Those watching on TV first cried out in triumph with the two Korean goals, followed quickly by those watching via the internet. In fact, those cheering in Seoul, whether through TV or the internet, saw the goal slightly later than those watched at the stadium in Russia. Such time lags will vanish with the advent of 5G telecommunications. Humans can finally transcend time.

Is it too much to say that a time lag might result in errors in industrial fields? When autonomous robots detect an error and halt operations at a plant, there is a time lag before the signals detected by sensors can be processed and transmitted to the control unit. Arithmetic units and programs must be installed in equipment to address this issue, causing the size and cost of equipment to rise. When equipment is managed online using the cloud, the size and cost of the equipment required can be reduced significantly. Time matters in this case. If equipment can become quicker than human reaction time, this would be an important breakthrough.

Generally, the control center must be placed within a steel plant to allow it to control the process without a time delay. However, if signals can still be transmitted faster than human reactions, the control center does not have to be located within the steel plant itself. In fact, one control center could oversee several plants of the same type. What about meetings in the workplace?

These days many companies hold remote meetings. Although theoretically feasible, remote video conferencing can still become inconvenient when the transmission speed for video and sound cannot support a reasonable time delay. This issue can be addressed through 5G technology. With video conferencing, people might feel like they are talking to one another face-to-face without any time lag. If this can be combined with three-dimensional holographic imaging, it will feel like talking to a real person even if they are actually on the other side of the world.

The commercialization of 5G technology will bring rapid changes to people’s lives. The first might be an expansion of shared offices. As shared offices are now generally used only for specific businesses, the impact of shared offices has been relatively minimal. If large companies and public institutions install shared offices near residential areas serving their employees, shared offices could have a significant impact on society.

In major cities like Seoul, Tokyo, and Beijing, workers will no longer have to spend as much time on the road. They can go to shared offices near their homes and hold remote meetings through holographic communication with their headquarters. Today, it is common to share desks at a workplace. It will not take much time to transition from desk sharing to office sharing. People will enjoy greater business opportunities as they encounter people from different teams or companies. The declining number of commuters will reduce traffic volumes. Fine particulate matter, recently a hot-button issue in South Korea, can also be mitigated to some degree. Fewer people will buy cars as they perceive less need to own them. This is evidenced by the fact that car sales are slipping in New York, Tokyo, and other large cities. Even the number of drivers’ licenses being issued is falling. With the spread of 5G technology, autonomous cars will become ubiquitous and shared cars will emerge as a norm, transforming the landscape for the automotive industry.

Autonomous cars are already a future realized. Autonomous cars collect traffic information to find optimal routes and detect road risks by monitoring the movement of nearby cars with active sensors. Intelligent autonomous car technology will advance with the significant improvement in the speed of telecommunication to cloud servers responsible for processing information using big data. 5G technology will help complete the real-time intelligent driving control systems required for autonomous cars.

Autonomous cars are already a future realized. Autonomous cars collect traffic information to find optimal routes and detect road risks by monitoring the movement of nearby cars with active
sensors. Intelligent autonomous car technology will advance with the significant improvement in the speed of telecommunication to cloud servers responsible for processing information using big data. 5G technology will help complete the real-time intelligent driving control systems required for autonomous cars.

Changes over the upcoming years or decades will be more significant than those that occurred during the last century. People’s ways of life will alter. Such changes in society will disrupt the order of conventional production and consumption and result in a new order. This new arrangement will in turn generate new demand. The question is who will seize this opportunity first. In the materials industry, companies that take a preemptive approach to this new order will certainly take the lead.

On the other hand, the Korean Institute of Metals and Materials (KIM) has selected five future materials-related issues and suggested promising materials for development. Their five
issues are: adaptation to a ‘new climate regime’; preparation for a super-aged society; disaster prevention; continuous economic growth; and a hyper-connected society. KIM has proposed types of materials to suit these five issues: materials adaptable to climate change, wellness bio-materials, safe materials, sustainable materials, and smart materials. For the steel industry, future materials adaptable to climate change, safe materials, and sustainable materials will all rise in importance. The changes in society triggered by 5G technology are closely related to the construction of smart cities using the future materials.

l The Rise of Future Metropolitan Cities

Metropolitan cities are essentially comprised of business and residential districts. In the morning, people travel long distances from residential to business areas and reverse the trip every evening. Such long-distance
commuting will disappear if shared or co-working offices become commonplace near public transportation terminals. In Korea, numerous knowledge industry centers have already been established near subway transfer stations to be used as shared offices. People could go to shared offices in the suburbs near their homes, creating new business opportunities through interaction with people from other companies. Unlike in the past when people worked with the same group of persons in the same office, they can encounter others from diverse fields of business, helping them become more creative. Time once spent on commuting can instead be used for self-development and leisure. Sports and entertainment facilities, including theaters, indoor sports centers, and tennis courts, will expand, and small businesses will flourish as they serve community residents. Such towns will require different types of buildings, and reconstruction projects refurbishing old town centers will gain ground. Once again, steel will present itself as the most suitable material for construction to proactively adapt to a rapidly changing society. The mandatory 52-hour workweek, rising labor costs, and burdensome environmental restrictions in the construction field will provide steel an opportunity to regain the position as the favored construction materials that it lost to concrete. In Great Britain, where steel is widely used for building, it is easy to procure steel components for construction. However, this industrial structure is less mature in Korea and other Asian countries where concrete buildings can easily be built due to low labor costs. This is one of the main reasons why it is essential to develop new steel construction materials in various types. Moreover, the steel industry should carefully consider how to inform consumers about the advantages of steel as a construction material: providing safety and convenience with resistance to Kim Nan-do, ‘Trend Korea 2019’ both natural (typhoons, earthquakes, tsunamis, etc.) and human-caused disasters (war, terrorism attacks, fires).

l Establishment of New Logistics Systems

Although human mobility may decline, the volume of cargo transport is projected to increase. The flourishing of e-commerce businesses such as Amazon has ensured that the logistics industry will become one of the most important industries in the future. SoftBank Chairman Masayoshi Son, who has gained remarkable returns from his investment in the Chinese web retailer Alibaba, has recently invested in Korea’s e-commerce firm Coupang, underlining the importance of the e-commerce field. To suit the rise in both dual-income and single-person households in Korea, even fresh products can be now delivered to homes. For rapid delivery of major volumes of fresh vegetables, fruit, and dairy products, it is necessary to develop new kinds of transportation systems that connect farms and cities. What is important here is how we can improve energy efficiency and reduce fine particulate pollution in a future where massive logistics becomes the norm.

The best way to improve energy efficiency is to reduce the weight of the given transport mode. Materials development in transportation, including cars, trains, ships, and airplanes as well as
drones, is primarily focused on weight reduction as a means to improve energy efficiency. Steel has long been advantageous compared to other materials, but it is being challenged by other lightweight materials. Especially for the automotive industry, improved fuel economy has become a pressing issue under increasingly strict environmental standards. The US government plans to require US vehicles to achieve fuel economy of 23.9 km/l by 2025, while Europe and Japan have set fuel economy targets of 26.5 km/l and 20.3 km/l, respectively, by 2020. Korea also plans to meet the fuel economy target of 24.3 km/l by 2020. This means that the automotive industry must improve fuel economy by more than 50% on average by 2025.

The steel industry is preparing for this situation by developing next-generation automotive steel. One example is high-strength Fe-Mn-Al-C lightweight steel, which is made over 10% lighter than conventional Fe-Mn-C steel through the addition of 5-10% aluminum content, and thereby becoming more competitive than aluminum on its own. Lightweight steel commonly has a disadvantage of having less than 1 GPa grade tensile strength. In order to overcome this, precipitation hardening martensite steel is being developed, and analysis is underway on the utilization of retained austenite. Aluminum is one of the fastest growing materials for use in vehicles, and carbon fiber reinforced composites and titanium are increasingly being applied as aerospace materials. Steel is used for aircraft landing gear, but the scope of application of steel is falling. To reduce the weight of high-speed trains, the share of the steel frame in railway rolling stock is declining and high-strength aluminum extrusion alloys and aluminum plate are on the rise in lightweight frames. Recently, extensive research is being conducted for saving weight in frames and internal materials using ignition-proof magnesium alloy. The TGV Duplex is the first high-speed train using AZ91 magnesium alloy for seat components, and it has reduced body weight by 16.7% compared to conventional aluminum alloys. Korea’s highspeed train KTX also uses magnesium alloy for seat components to achieve a weight reduction of up to 35.6%. In the shipbuilding industry, steel is increasingly being replaced by corrosion-resistant aluminum alloys in both high speed and leisure vessels. For the logistics industry, when the cost of energy for transporting a certain volume of cargo exceeds the cost of the materials in the transport, a wider range of choices of materials will be available. Under these changing trends, aluminum, magnesium, and titanium had growth rates of 9.2%, 8.0%, and 6.3%, respectively, in 2014, according to the market research firm, Markets and Markets.

In an effort to reduce fine particulates, transport modes that burn fossil fuels within cities may be edged out of the logistics industry. A so-called hyperloop, which is a future high-speed transportation concept first proposed by Elon Musk, could be used for long-distance travel while electric vehicles (EVs) or drones could be applied for short-distance travel and rapid delivery. Due to their considerable battery weight, weight reduction is an important issue for EVs. The steel industry is actively working to meet this need with advanced high strength steels (AHSS). Steel pipes seem to be the most suitable material to create a hyperloop for cargo transport. Although a hyperloop designed to carry passengers may require alternative materials to ensure psychological relief for passengers as they may feel
uncomfortable inside opaque steel tubes, steel is the most competitive option in terms of cost for a hyperloop for cargo transport. Eco-friendly container vessels or transcontinental trains can be used for transport of transnational and transcontinental cargo. The Korea Railroad Research Institute has recently developed foldable containers to improve logistics efficiency. These types of efforts will continue to become increasingly visible in various areas of logistics.

l Suitable Urban Systems

Older cities around the world share one thing in common: they have difficulty raising the massive funds required for urban regeneration. As buildings have a life cycle spanning more than 100 years, reconstruction costs are not generally included when calculating their construction costs, passing the buck down to future generations. As a result, major cities around the globe are experiencing fatigue. For a more sustainable urban system, regeneration costs must be considered from the start. Urban design should take the optimization of urban energy consumption and recycling into account. Steel is clearly the most competitive material for sustainable urban design. As nearly 80% of a steel house is recyclable, steel can be considered the base material most suitable for sustainable cities.2 If materials development puts its highest priority on energy reduction and resource circulation, the reduction of the weight of high strength steel can be a solution. POSCO A&C, a comprehensive architectural service company fully financed by POSCO, has recently developed modular housing and other structures, but the high price tag of the design in its early stages is keeping consumers at bay. The development of modular buildings would require a dramatic shift, for example, by adopting new steel materials such as printed color steel sheet. Such newly developed steel materials should be resistant to earthquakes, typhoons, and fires. Further technological advances should be pursued to address problems at a competitive price, including floor noise and thermal insulation.

▲ POSCO A&C website

l Needs for Innovation of Steel Materials

Historically, the advancement of scientific technologies has resulted in social transformations. It was only after the Industrial Revolution that workplaces became separated from places of residence. Apartments, the most common residential spaces in Korea, have been built to accommodate ballooning numbers of urban workers. The Industrial Revolution has brought profound changes to lifestyles that had been stable for centuries. In the First Industrial Revolution, steam engines created value through mass production. In the Second and Third Industrial Revolutions, the introduction of electricity and IT-based automation technology resulted in breakthroughs in production. Mass production cut costs and eventually expanded markets and increased sales. However, at the same time, it led to the reckless use of energy and resources, giving rise to several environmental and social issues. The Fourth Industrial Revolution, known for its data revolution, will also drive seismic changes in the lives of people with the advent of 5G telecommunications that can better apply the full value of data. Customized mass production is fundamentally addressing the issue of the resources wasted in mass production, while at the same time changing ways of life. The previous industrial revolutions separated work from places of residence, but the Fourth Industrial Revolution will return workspaces to residential areas. Perhaps the distant and even broken relations among families and neighbors can be restored. New communities can be created. Novel opportunities will arise for some of the sectors of society overlooked in the past. The issue is now a matter of who will react preemptively to these changes. Time is running out: A seismic change in society is just around the corner. The steel industry’s capacity to adapt to this change will be tested. The industrial revolutions of the past have transformed the lives of people, and those well prepared for such transformations have seized the opportunities they created.

* This article has been reproduced from Asian Steel Watch, a bi-annual English journal specialized in the Asian steel industry. The original version Vol. 7 (2019.08) can be accessed and downloaded directly from POSRI’s website here.

The ideas of “Smart Cities” are nothing new ⁠— they have been around for a while now as the future of urbanism. POSCO has been tapping this relatively uncharted territory through its vision for ‘Mega City.’ Still, crucial questions remain: what exactly are smart cities? And how would smart cities transform the landscape of the steel industry?

Asian Steel Watch, the biannual English journal specialized in the Asian steel industry, can provide insights into these questions. ASW vol. 7 features an in-depth study that addresses everything from the very definition of smart cities to how smart cities are helping to address urban issues and create new market opportunities. POSCO Newsroom reports:

l Why Smart Cities?

Urbanization has been progressing rapidly worldwide. The number of megacities with more than 10 million inhabitants is projected to rise from the 14 noted in 1995 to 46 by 2035. Increasing numbers of people are moving from rural to urban areas. The global share of the urban population is expected to rise to 62% by 2035, up from 45% in 1995.

Massive centralized cities are advantageous in terms of economic efficiency and effectiveness since production, consumption, education, and cultural development can all take place within a single area. For this reason, urbanization has been a natural response in many industrialized countries as a means to increase returns from investment and for sourcing talent. However, the rise of mega-cities and increasing population density have resulted in several threats to the quality of life of city dwellers.

Ironically, the industrial complexes, high-rise buildings, and transport infrastructure that were intended to increase public convenience have triggered several issues such as excessive energy consumption, environmental pollution, public insecurity, and income disparities. This in turn has threatened the quality of life of urban dwellers and diminished the sustainability of cities. Smart cities aim to address some of the issues stemming from rapid urbanization and high population density by using scientific and information technology to forge a more sustainable urban environment.

l Development of Smart Cities

The concept of smart cities emerged in the mid-1990s as the internet and information infrastructure became widespread. America Online (AOL) first suggested the concept of a smart city in which services are provided through a network. With the advent of the internet, telecommunications companies began offering new service models and testing pilot projects. The notion was given increasing attention when a series of smart city plans was formulated for megacities, including Amsterdam Digital City in 1993, Helsinki Arena 2000 in 1996, and Tokyo Smart City in 1998.

Smart cities began to spread during the 2000s when their commercial value was recognized. With the expanding popularity of the internet, various projects were planned in Europe and the US. Following the announcement of IBM’s Smarter Planet strategy, global companies including Cisco and Siemens actively entered the smart city field, which began to be regarded as an industry. In South Korea, the u-City concept was introduced in 2003. The Ubiquitous Cities Act was legislated in 2008 and applied to several new cities, including Hwasung and Dongtan.

After 2010, major Asian cities, including some in China and India, released hundreds of smart city plans and global smart city projects gained momentum. With the rise of the Fourth Industrial Revolution and related technologies such as AI, IoT, and big data, bold government policies and corporate innovations are on the rise, exemplified by Google’s Sidewalk Labs in Toronto and Alibaba’s City Brain model in Hangzhou. A smart city can be defined by its purpose or its means. So far, ‘smart city’ has been generally understood according to its purpose. As multiple definitions were released by diverse organizations and institutions, there has been some confusion surrounding the concept of a smart city. According to a report by the al Revolution and related technologies such as AI, IoT, and big data, bold government policies and corporate innovations are on the rise, exemplified by Google’s Sidewalk Labs in Toronto and Alibaba’s City Brain model in Hangzhou.

l What Is a Smart City?

A smart city can be defined by its purpose or its means. So far, ‘smart city’ has been generally understood according to its purpose. As multiple definitions were released by diverse organizations and institutions, there has been some confusion surrounding the concept of a smart city. According to a report by the International Telecommunication Union (ITU) in 2014, there were 116 definitions of a smart city. Five keywords can be extracted from these various definitions, however: 1) competitiveness; 2) intelligence and informatization; 3) eco-friendliness and sustainability; 4) quality of life of inhabitants; and 5) infrastructure and services. However, some argue that defining a smart city according to its purpose is not helpful for solving urban problems due to the differences in their social, cultural, and industrial backgrounds.

For this reason, a new concept of a ‘city as a platform’ has been gaining ground, meaning that cities should serve as a means or platform for troubleshooting. The concept of a ‘smart city as a means’ relates that customized solutions can be created to address urban issues economically and effectively by activating the upper layers of data and service in a structure consisting of infrastructure, data, and service layers, as seen in Figure 4. Many cities and local governments have selected low-cost and high-efficiency methods based on software and data to ensure sustainable city management. Through a smart city competition open to local residents, they collect ideas to address social issues, verify the outcomes of pilot projects, and spread them to other cities.

l Differences in Smart Cities by Region and Major Keywords

Smart city projects first emerged in advanced nations, including in North America and Europe, but are now rapidly spreading to developing nations. The goals and implementation schemes for smart cities vary by region. Developing nations build infrastructure and new cities using massive infusions of public funds for the purpose of the urban development required for establishing industrial infrastructure and achieving economic growth. In contrast, advanced nations generally aim to address urban issues through ICT, including IoT and big data, by making existing infrastructure intelligent and pursuing technological innovation and open data.

There is one common keyword shared by all types of smart city projects: energy efficiency. Energy efficiency accounts for 36% of stated goals and new urban development accounts for 19% of the goals of smart city projects currently underway across major cities. Energy efficiency is relevant in both advanced and developing countries, while new urban development is generally considered a priority in developing countries.

In the EU and North America, the key agenda is the shift to a low-carbon economy that can help to address climate change. The related goals include making cities more energy efficient and addressing urban issues through innovative technologies and open data. Ideas for solving urban problems have been collected through smart city competitions sponsored by public-private partnerships or with private funds. Pilot projects can be verified through living labs and the outcomes gradually applied. Projects are generally conducted by local governments while central governments provide R&D resources for technological innovation.

However, Asian countries with lower levels of industrialization than advanced countries generally pursue new urban development projects. These projects are commonly large-scale projects to build industrial complexes and fuel urban development while supplementing insufficient resources. Rather than the mitigation of climate change being pursued in the EU and North America, Asian projects are mainly focused on industrial infrastructure to enhance urban competitiveness and bolster the local economy. These urban development projects are led by local governments in collaboration with foreign governments and corporations in an effort to attract foreign investment and technology transfers.

Just like in the cases from the EU and North America, Latin American projects are pursuing energy efficiency, innovative technology, and open data to resolve urban issues. This stems from their early westernization leading to an urban structure where more than 80% of people live in cities. The smart city agenda for these countries consequently includes addressing the heavy concentration of people into large cities and the resulting issues such as public insecurity, traffic jams, and obsolete infrastructure. Diverse smart city projects are underway in Latin America, including in Brazil and Mexico.

l Smart City Policies and Implementation by Country

Many countries and local governments are implementing a variety of support measures for smart cities in an effort to boost competitiveness and improve the quality of life of urban dwellers. India and China are encouraging smart city projects as a means to refurbish national infrastructure and enhance urban competitiveness.

[The diverse efforts being made to support smart cities will change people’s lives, the type of industries, and the value chains for related industries. The source of added value is shifting from hardware to software under this transformation.

[As business models rapidly evolve with the rise of smart cities, the steel industry must think seriously about how the future will be unfold.]

In 2015, the government of India announced its Smart Cities Mission budgeted at INR 480 billion, which aims to develop 100 smart cities through 2022: establishing nine satellite cities with populations of over 4 million; turning 44 cities with populations of 1 to 4 million into smart cities; and establishing 20 small cities with populations less than 1 million. By connecting this mission to the country’s industrial master plan, India is endeavoring to improve industrial competitiveness and sophisticate its infrastructure.

The Chinese central government has been implementing massive smart city projects since 2013. Under the 12th Five-Year Economic Development Plan (2011-2015), the central government announced its intention to invest RMB 300 billion in establishing 320 smart cities by 2015 in the first phase of the project. Ninety pilot cities were selected in January 2013 and 103 more in August 2013. It expanded the existing smart city plan by 2017 with a combined investment reaching RMB 2 trillion in 2025. It is worth noting that China’s smart city projects are not simply about the sophistication of urban infrastructure. They also aim to increase the share of application and utilization of new technologies, including big data, IoT, and cloud computing in connection with the ‘Internet Plus’ strategy.

South Korea is also working on smart city projects through public-private collaborations. Recognizing smart cities as one of the enablers of the Fourth Industrial Revolution, the country has created a Special Subcommittee on Smart Cities under the Presidential Committee on the Fourth Industrial Revolution. In 2018, the Act on the Promotion of Smart City Development and Industry was legislated to support the industrialization of smart cities. Busan and Sejong City were selected as pilot cities for new technologies in autonomous cars, renewable energy, and block chains, as well as to provide incubators for new services.

Meanwhile, US and EU smart city projects are being led by local governments rather than central institutions. Central governments there fund a variety of R&D projects to develop and apply innovative technologies for the realization of smart cities, while local governments select prospective smart cities and formulate relevant strategies. The EU set up the European Innovation Partnership on Smart Cities and Communities (EIPECC) in 2011 in an effort to spread the smart city concept across Europe. In 2013, it announced strategic plans for implementing smart city projects and funded 350 projects conducted by 2,500 partners from the EU-32. In the US, the Obama administration released the US Smart Cities Initiative in 2015 with funding of USD 160 million for R&D projects on 25 new energy and environmental technologies.

As illustrated in the cases of these countries, smart city projects have been implemented in a variety of manners suited to the respective countries’ social and cultural backgrounds and level of industrial development. Both the perception and role of smart cities are rapidly changing, too. Their role is expanding from being simply a means to improve the convenience of citizens to providing a test bed that inspires the emergence of new and disruptive business models.

Both the central government-led smart city projects in South Korea, China, and Singapore and the local government-led projects in the USA, Canada, and Germany are designed to promote the emergence of experimental services based on the Fourth Industrial Revolution, such as AI, AR/VR, blockchain, and IoT, and entail complex policy requirements for technological development, start-ups, and job creation. This means that these projects are not just being managed by teams focused on urban infrastructure, but by diverse teams specialized in technology, industry, and human resources, as well as by councils featuring representatives of civic, academic, and research institute perspectives.

l Development Direction of and Market Opportunities for Smart Cities

Smart cities originated in the digital cities that emerged with the rise of the internet in the 1990s. After a lengthy discussion of smart cities over the last two decades, diverse projects are underway across the globe.

However, these efforts are mostly one-time projects for the purpose of overseeing urban infrastructure more efficiently and improving the management of disasters, safety, parks, and traffic. Such projects have been operated as silos with independent functions: the public sector places orders, companies take the orders and build systems, and citizens make use of the resulting services.

In contrast, recent projects have been implemented through alliances featuring citizens, research institutes, and corporations aiming to create a service model that ensures continuous evolution and development. A black-or-white approach in which the public sector must become the providers of services and the citizens become the receivers must be avoided. Instead, the public sector should participate in creating a platform-based ecosystem and serve as mediators that coordinate any conflicts of interests. They should also operate as facilitators in an ecosystem that utilizes public funds to encourage citizens to undertake challenges and assist in the creation of new business models. Through these experiments, many companies will continue to develop business models and enrich the ecosystem.

This evolution entails a shift in market opportunities in smart cities.

From the perspective of traditional industry, market opportunities in smart cities lie in the construction of urban infrastructure, such as urban development and base infrastructure projects. In terms of market size, public infrastructure, industrial complexes, and residential buildings still account for the lion’s share of the construction market.

It is now time to move on from hardware and take a fresh new approach to emerging opportunities. In the automotive industry, various experiments are being tested, resulting in new business models for electric and autonomous cars. In addition, the energy industry is transforming itself from a massive processing industry into a platform industry with distributed generation.

Future cities will not remain merely an aggregate of hardware comprised of concrete and steel, but a fusion of new and disruptive service models based on infrastructure. In coming years, value will be created not by hardware, but by the software within it. This is also true for the construction and steel industries. Selling buildings or steel is not enough to seize the major opportunities within the smart city market. Related changes are underway. The construction industry is shifting its business model from the one-time construction of infrastructure to its operation and management. When combined with AI, IoT, and other emerging technologies, this will be expanded to more diverse fields and formats.

The steel industry is in the same boat. E-commerce took off just a few years ago, but it is now taking over. Such a change goes beyond the expansion of offline transactions into online distribution channels. Taking into account the characteristics of e-commerce platforms on which various stakeholders interact, steel e-commerce will be developed from steel transactions into a new business model blending finance, logistics, and other manufacturing. This transformation will be connected to the new services and markets sparked by smart cities, eventually expanding the field for the steel industry.

Smart cities are the future of industry. The diverse efforts being made to support smart cities will change people’s lives, the type of industries, and the value chains for related industries. The source of added value is shifting from hardware to software under this transformation. As business models rapidly evolve with the rise of smart cities, the steel industry must think seriously about how the future will unfold.

* This article has been reproduced from Asian Steel Watch, a bi-annual English journal specialized in the Asian steel industry. The original version Vol. 7 (2019.08) can be accessed and downloaded directly from POSRI’s website here.

The bi-annual English journal specialized in the Asian steel industry, which features current issues, interviews with steel guru, and market forecast and analysis.

On this issue, Asian Steel Watch sheds light on corporate citizenship with the cover story titled “Being a Good Corporate Citizen.”

Katherine Smith, Executive Director of Boston College Center for Corporate Citizenship describes what corporate citizenship is and why we need it in her contribution to Asian Steel Watch, “The Corporate Citizenship Challenge.”

Sourav Roy, Chief of CSR, Tata Steel introduces Tata Steel’s determined efforts to practice corporate citizenship in “Tata Steel: A Benchmark in Corporate Citizenship.”

Yang Weon-Jun, Executive Vice President of Corporate Citizenship Office, POSCO explains why POSCO has embraced its new management philosophy and how it is giving shape to the philosophy to become a good corporate citizen in “POSCO’s Corporate Citizenship: Its Meaning and Application.”

Finally, Sooyoung Kim, Professor of Division of Humanities and Social Sciences, POSTECH and Director of POSTECH CCRI (Corporate Citizenship Research Institute) touches on social issues to explain corporate citizenship in “Five Social Issues Facing the Korean Steel Industry: A Corporate Citizenship Perspective.”

In addition, in the Special Report section Zheng Yuchun, Deputy Director of China Steel Development and Research Institute analyzes China’s steel industry in “Restructuring of the Chinese Steel Industry: Challenges and Prospects.”

The Featured Articles section covers smart cities: “The Evolution of Smart Cities and Opportunities for the Steel Industry” and “Shifting Needs for Steel Materials with the Rise of 5G Telecommunications and Smart Cities.”

The Market Trend and Analysis section deals with Vietnam’s steel industry in “Vietnam’s Steel Industry: Characteristics and Steel Demand Forecast.”

The full version of the Asian Steel Watch vol. 7 can be downloaded at POSRI website.

Prime Minister Modi revamped India’s economy with his “Make in India” initiative. (Source: LinkedIn)

Most notably, Prime Minister Modi launched the “Make in India” initiative in September 2014, showing his resolve to revamp the manufacturing industry in India. Under the initiative, domestic as well as foreign companies are encouraged to manufacture their goods in India with the goal of increasing the makeup of the manufacturing industry to 25 percent of GDP by 2025.

At the heart of the initiative is the government’s efforts to ignite the steel industry. The National Steel Policy (NSP) 2017 declared that India will become self-sufficient on domestic steel supplies by increasing its steel production capacity from 122 Mt in 2015 to 300 Mt in 2030. However, the steel industry currently only makes up 1.04 percent of the country’s GDP.

Challenges Ahead for India’s Steel Industry

Despite India’s promising potential and robust government support, the steel industry has not met the government’s high expectations and growth has been modest. According to researchers in volume 4 of the Asian Steel Watch, there are deep structural flaws within India’s steel industry that need to be addressed before the country can reach its full potential.

One of the industry’s biggest challenges is its growing debt – In 2016, the steel industry surpassed INR 3 trillion in debt. Most of the country’s steel and infrastructure projects are financed by the government. What India needs is more private sector involvement, but private players are hesitant due to complex regulations, a lack of business models and no guarantee on returns on investment (ROI). The government has also been slow to secure FDI because, over the years, India’s steel industry has displayed poor planning and management of projects as well as a mismanagement of funds.

India’s mining industry will directly affect the success of the steel industry. (Source: Pinterest)

Another major challenge has to do with India’s natural resource management, as mining companies do not have fair access to the country’s abundant resources. The mining industry is subject to heavy tax burdens including the royalty, local area development tax, forest development tax and much more as it is a profitable business for the government. Plus, the costs of meeting international environmental standards are passed directly onto mining companies. Thus, the price of iron ore and other minerals do not reflect the abundant supplies available, and the higher prices ripple into the steel industry.

Moreover, the government regards the steel industry as the backbone of India’s economy, but in reality, the times are changing.

Technological advances in the manufacturing industry is making the steel production process more efficient and less labor intensive. (Source: South China Morning Post)

In the past, 70,000 workers were required to produce 1.5 Mt of steel. Today, it takes about 3,000-4,000 workers to make 5 Mt a year. The steel industry is just not what it used to be in terms of the positive effects it had on the economy as a whole. The industry requires intensive capital and the only way it will survive is with low labor costs and maximum manpower productivity.

India needs to take full advantage of the country’s abundant resources and capitalize on its competitiveness to reach its full potential. In order to do so, India can start by examining other steel industries that served as the main driver for national economic growth, such as Korea’s.

Takeaways from Korea

After the Korean war in 1953, Korea had to build its economy up from scratch. Like India, the government chose to stimulate its steel industry and spent its war reparations payment from Japan to build POSCO’s steel mill in 1969. Since then, the state-led steelmaker has been a primary engine for Korea’s miraculous economic growth.

The construction of POSCO’s headquarters began in May 1968.

So how did Korea manage such growth?

The government allocated much of its resources to infrastructure construction for efficient logistics and implemented policies to support the mutual growth of steel and steel-consuming industries. Moreover, the government practiced protectionist trade policies long enough to get Korea’s steel business on its feet, then supported a market-driven business model.

The government also kept a close watch on supply and demand forecasts and updated its supply policies timely and accordingly. Factors such as demographic changes, industrialization patterns, urbanization and labor costs should be examined holistically to prevent the gap between supply and demand from increasing too much. For example, in 2010, the Korean government implemented capacity expansion policies that resulted in oversupply and a prolonged recession. This was because policymakers failed to diagnose the symptoms of the mid to long-term steel demand forecasts that showed sluggish demand. Since then, Korean policymakers keep close watch on such measures to update the country’s supply policies.

Finally, the Korean steel industry invested heavily in knowledge accumulation and R&D to wean off of Japan’s technical support and become an exporter of steel technology.

POSCO is now a leader in steel production technology.

Compared to Korea, India has an advantage in almost every aspect. The country’s per capita steel consumption is still low and the booming population will drive demand in steel-related industries. With much room for growth, the Indian steel industry can expect to see accelerated growth when paired with the right policies and government support.

Since 2014, sales of products combined with Solution Marketing have tripled, and sales of POSCO’s World Premium Products (WPP) have increased by 56 percent.

It Wasn’t Always Smooth Sailing

When the 2008 global financial crisis hit, the global economy as a whole suffered. The steel industry experienced stagnant growth, even in its subsequent recovery. From 2012 to 2016, annual steel sales remained fixed at 35 million tons.

The 2008 Financial Crisis was felt in markets all over the world. (Source: South China Morning Post)

The main culprit for the slow recovery was overproduction, mostly from the heavily-subsidized Chinese steel industry. Between 2000 and 2014, steel production doubled from 800 million to 1.6 billion tons, exceeding the global demand for steel by 100 million tons.

As a result, steel markets around the world saw prices falling, layoffs and steel mill closures.

SEE ALSO: Asian Steel Watch: Megatrends Shaping the Future of the Steel Industry

A Strategy for Success

In order to stay competitive in a stagnant market, POSCO made the decision to focus on Solution Marketing and the sales of its World Premium Products (WPP) such as POSCO GIGA STEEL for cars and PosMAC for solar panels.

Solution Marketing involves hyper-customization for POSCO’s partners to deliver optimal material solutions for their products. Some notable projects this year have been with automakers GM Korea and Ssangyong Motors for the launch of their new models made of POSCO GIGA STEEL. POSCO gave them full support from development and R&D to testing and post-production evaluations, redefining the role of a steel supplier.

GM Korea and POSCO worked together to incorporate POSCO GIGA STEEL into the 2017 All New Chevy Cruze. (Source: GM Korea)

As a result, POSCO’s operating profit margin (individual basis) was 10.8 percent in 2016, making it one of the highest performing steel companies in the world. Its recovery and growth continued into 2017.

SEE ALSO: 6 Reasons Why POSCO GIGA STEEL is Ideal for Automakers

Cultivating the Industry

Following its continued success with Solution Marketing, POSCO is now determined to share its insights and technology with up and coming small and medium-sized enterprises (SMEs). POSCO has completed 32 shared-growth projects through which they work with SMEs to develop ways to cut costs, improve the quality of their work, provide financial assistance and education and training.

One of the most recent projects for shared growth is a collaborative business model called “System Construction” that provides a framework for effective technical cooperation among POSCO’s partners in the construction industry. The model was developed jointly with NI Steel and entails systemizing composite materials such as beams, floor decks, exterior panels and roofing materials, all based on joint R&D from both parties.

Under System Construction, workers from various sectors come together for joint development.

POSCO is continuing its efforts to advance its competitiveness by providing material and technical solutions to its partners, and along the way, fostering the growth of SMEs in various industries to ensure a more stable and robust economy.

Read how these megatrends and the expansion of the four largest steel-consuming industries have driven the growth of the steel industry from the last fifty years and will continue to play a crucial role.

Megatrends and their impact on the steel industry

Future Cities and Changes in Steel Materials

Urbanization is a key driver in the development of the global construction industry and will further accelerate in the future with rapid industrialization in developing countries and the shift to a knowledge economy in advanced countries.

Within the overall shift toward urbanization, many countries are actively crafting policies to develop their cities as globally competitive megacities. There is an increasing number of megacities with over 10 million inhabitants as the competition paradigm shifts from competition among countries to competition among cities.

Also, with a growing sense of urgency in improving the environment in terms of ozone depletion, climate change and energy and resource exhaustion, eco-friendly, green cities are emerging as a new trend.

Lastly, smart cities, characterized by digital transformation and energy revolution, will rapidly expand in the future drawing on the Fourth Industrial Revolution.

Following the ongoing and emerging trends of urbanization and future cities, new advanced steel materials are required to accompany emerging trends and accelerate the development of megatall, eco-friendly and smart products. Conventional steel materials for construction, such as steel bar and section, will improve in functionality with higher strength, thermal conductivity and better sound isolation. They will also be developed as composite materials and new materials such as carbon nanotubes and shape memory alloys will be widely deployed in construction processes. However, as construction costs (labor costs and the use of high-strength steel materials, for example), increase, steel content per unit of construction investment is expected to decline.

A New Mobility Paradigm

Led by high-income earners, lower car prices and improved road infrastructure, the key trend for the automotive industry is motorization. Today, automobiles are no longer just a means of transportation but becoming a major arena for IT competition with the rise of electric vehicles, robotic vehicles and new mobility services.

As a response to global warming, electric vehicles and energy-efficient self-driving cars are becoming increasingly widespread along with the rise of new innovative mobility services, such as robo-taxis and self-driving mini-buses.

In the case of EVs, less auto parts will be required as metal parts such as powertrain components – the engine, vehicle intake and exhaust system, and transmission – will be replaced by batteries, motors, and electronic parts. As cars are made lighter to improve driving range, alternative materials such as aluminum and CFRP are being used in some luxury lineups.

In order to retain its competitiveness and also meet increasingly strict environmental regulations, the steel industry is developing lighter and stronger steel materials such as advanced high-strength steel (AHSS) to replace traditional steel products. Steel, a strong and economically competitive material, remains an attractive choice for both EVs and self-driving cars.

Recovery of the Shipbuilding Industry

Technological advancement as a result of the Fourth Industrial Revolution and changing environmental regulations will bring considerable changes to the shipbuilding industry.

The shipbuilding industry, which boomed in the 2000’s, experienced a downturn after the 2008-09 financial crisis. Although the oversupply will linger until 2025, the shipbuilding market will then turn to an upswing with increasing growing global trade and rising demand for ship replacement.

With the development of ultra-large container ships, LNG-fueled ships, electric ships, CO₂ carriers, polar ships, and environmentally–friendly equipment, high-strength steel for ultra-large and lighter ships and high-strength low-alloy steel for safe and affordable LNG and CO₂ storage tanks are required.

As vessels become larger and lighter, the steel intensity of ship’s tonnage will fall. Steel intensity is expected to decline due to larger and lighter vessels.

Global Climate Action and Energy Transition

As a response to global warming, renewable energy is increasingly in demand. In fact, it is no longer being referred to as “alternative” energy but “mainstream”. The International Energy Agency (IEA) has predicted that the share of renewables within global power generation is expected to rise from 23 percent in 2014 to 37 percent by 2040.

The renewable energy sector is also adopting various types of steel products. The tube tower, which accounts for 65% of the weight of a wind turbine, is made mainly of steel, while thin stainless steel sheets and frames are required for solar panels. This wide application of steel products offers additional business opportunities to steel companies.

Meanwhile, the share of fossil fuels within primary energy consumption will fall from 81 percent to 74 percent over this span. However, the decline will be gradual due to population and economic growth in emerging countries and fossil fuels will continue to play a dominant role in the energy sector in terms of quantity of consumption.

Steel companies must target new markets by developing innovative steel products for the microgrids and energy storage systems which will grow alongside renewable energy.

The Steel Industry Over the Next Two Decades

Over the next two decades, the steel industry will face the following four challenges: slowing steel demand due to decreased steel intensity across major steel-consuming industries; a need for more advanced steel products; upgrading to eco-friendly and smart steelmaking processes; and changes in manufacturing based on the Fourth Industrial Revolution.

Accordingly, it is imperative that the steel industry boost its capabilities for continues product and process innovation and build a sound steel ecosystem through partnerships with steel-consuming industries.

To this end, POSCO is not only investing in the development of an eco-friendly rolling process but also in sustainable development including energy conservation and recycling technologies. In addition to factory automation based on IoT, big data and AI, POSCO is working to increase the application of smart technology internally as well as externally with its partners and affiliates.

It is an exciting time for the steel industry as it continues to transform along with the ongoing and emerging megatrends.

Download the full version of POSRI’s Asian Steel Watch journal for more at POSRI’s official website.

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With a focus on Asia, the English-language journal investigates the continually changing trends in the steel industry in-depth, along with a broader look at Asia’s macroeconomic situation and larger trends in steel consumption.

A New Wave Transforms Industry

The focus of the latest Asian Steel Watch is the “Fourth Wave of Manufacturing” – which refers to the integration of industry with the latest in IT technology, including the Internet of Things (IoT), artificial intelligence, the cloud and big data. As in many fields, the steel industry is being transformed by the revolution in information technology, bringing new challenges and new opportunities.

This special section includes four articles in Industry 4.0:

The Fourth Industrial Revolution: The Winds of Change Are Blowing in the Steel Industry: Summarizes how the latest changed in technology are changing the steel industry, from production to distribution.

Accelerating Digital Transformation with Smart Factory to Unlock New Value: Case of POSCO: When it comes to how Industry 4.0 is changing POSCO, the emphasis is on “smarter.” From sensors to analytics to controls, smart technology is reducing costs and improving output.

China Is Shifting to the “Smart Factory of the World”: China became the world’s largest manufacturing nation in 2010, but today slowing growth is forcing the Middle Kingdom to look for new paths to prosperity. Plans like “Made in China 2025” and “Internet Plus” represent China’s attempts at using the latest technological advances to grow for a new era.

The Rise, Prospects, and Impact of China’s Steel E-Commerce: With so much fierce competition in the Chinese steel market, there is much hope that e-commerce can create new possibilities and efficiencies for manufacturers, as well as distributors and investors.

Additional Topics in This Issue

In addition to the Fourth Wave of Manufacturing, the latest issue of Asian Steel Watch also explores a range of compelling topics affecting the steel industry today.

Ask the Guru: Roads Ahead for the Steel Industry: A fascinating interview with Edwin Basson, director general of worldsteel. Basson talks about the causes of sluggish demand in the steel industry predicted for 2017, China’s peak steel, solutions to overcapacity, the future of the steel industry in Asia, and the influence of the Fourth Industrial Revolution on the steel industry.

Global Competitiveness Through Hybridization of FINEX and CEM Processes: A special report by Dong Jin Min, professor in the Department of Materials Science and Engineering at Yonsei University in Korea, about alternative midi-mill ironmaking methods that use hybridization.

The Demographic Cliff: How It Will Impact Asia’s Steel Demand: As societies age, the demand for many key products decline, such as homes and automobiles, even as the demand for services increases. What lessons from Europe and other aging societies can be applied to countries like Korea, which are currently experiencing aging?

Restructuring of the Chinese Steel Industry: Retrospects and Prospects: With China’s steel production perhaps having peaked, this article proposes six directions for the future of the steel industry in China.

Myanmar, the Last Frontier in the ASEAN, Will See High Growth of Its Steel Industry: As Myanmar opens after 54 years of military rule, it is growing and transforming rapidly. With little capacity to manufacture its own steel, Myanmar should see a major rise in steel imports as it grows.

Market Trends and Analysis: Two articles explore the bigger trends affecting the steel industry. The first examines the last 100 years as a “supercycle” for the steel industry. And the second article takes an in-depth look at the latest statistics of the steel industry in Northeast Asia, analyzing how it is changing in Korea, China and Japan.

Over the next few weeks, we will be posting a series of stories about the articles in the latest edition of Asian Steel Watch. Be sure to check back here regularly to get an in-depth look at how the Fourth Wave of Manufacturing is transforming the world of steel, and developments around the world are affecting the Asian steel industry.

To analyze and explain the role of steel in the world, POSRI (POSCO Research Institute) has created Asian Steel Watch, a bi-annual journal that features content focused on the Asian steel industry.

This new journal is published in English and will cover current issues, as well as market forecasts and analysis. It is published by POSRI, which provides research-based consulting services for the steel industry.

POSRI, a subsidiary of POSCO, investigates the current economic issues and industries related to steel, making it the perfect organization to publish an informative and interesting journal about steel.

Asian Steel Watch provides in-depth analysis of the ever-changing trends in supply and demand and imports and exports, as well as the prices of steel products. It will also offer a broad analysis and insight into Asia’s macroeconomic environment and the trends in key Asian steel-consuming industries.

Ohjoon Kwon, President of POSCO, has big plans for this new publication, noting, “Asian Steel Watch will provide useful information that will guide governments and enterprises through current issues in the Asian steel market, including oversupply, customs duties, antidumping measures and environmental regulations.”

The steel industry supports each country’s manufacturing sector and overall economy. In order to maintain a stable economy, it’s essential to have access to timely information and analysis about the steel industry.

President Kwon stated, “At a time when information is power, Asian Steel Watch provides a firm foundation for the collaborative growth of Asia’s steel industry, further contributing to the stability and prosperity of the global steel market.”

Coming Up

In the first edition of POSRI’s Asian Steel Watch, a number of interesting stories, from “The Myth and Reality of Global Steel Overcapacity” to “China’s Steel Industry Meets the New Normal” were covered.

Some of the subjects explored in the bi-annual journal will be featured on The Steel Wire over the next few months.

The Myth and Reality of Global Steel Overcapacity: Overcapacity has long been blamed as the main cause of the recession in the steel industry (especially the price decline), but this claim has not yet been backed by enough systematic analysis. Through an expert Q&A with Dr. Rod Beddows we’ll answer the most common questions regarding overcapacity.

The Evolution of the Steel Production Process: The steel industry has continued to grow thanks to the superior characteristics of steel materials and economic mass production. We’ll discuss how mankind first began making steel using charcoal during the Iron Age, as well as how the steel production process has developed since then.

China’s Steel Industry Meets the New Normal: China’s economy maintained a double-digit annual growth rate for decades, and then slowed to around 7% in 2012. Chinese authorities have described this as the “new normal” state. Now China’s steel industry is aiming to find a new way of growth.

Korea’s Next Big Manufacturing Leap: Innovation Based on Culture, Creative Workforce, and Technology: Concerns are mounting over Korea’s manufacturing sector. Growth continues to taper, and profits keep falling. This is due largely to the sluggish global economy, which is struggling to recover, and to Korea being nudged out by its rivals, China and Japan.

Increased Trade Barriers in Southeast Asia Following a Rapid Rise in Steel Imports: Many Southeast Asian countries have concerns over surging Chinese steel imports and the subsequent loss of competitiveness of their steel industries. Amid an ongoing supply glut in the global steel industry, Southeast Asia has become a major destination for excess steel products from China.

Related Link:

In Southeast Asia, Surging Imports Lead to Rising Trade Barriers

The Future of Manufacturing in Korea

China’s Era of New Normal and its Implications on the Steel Industry

The Evolution of the Steel Production Process

The Myth and Reality of Global Steel Overcapacity

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