On December 7, employees celebrated reaching 20 million tons and took a commemorative photo.

FINEX is an innovative, paradigm-shifting technology where molten iron is produced directly in a blast furnace. The process eliminates preliminary processing and uses cheaper powder-type iron ore and bituminous coal as raw materials. Subsequently, investment and production costs can be reduced by 85 percent compared to those of general blast furnaces of the same size. In addition, the technology reduces SOx and NOx emissions by 40 and 15 percent respectively, and fine dust particles can be reduced by 34 percent compared to general blast furnaces.

The beginnings of the technology date back to the 1990s when the Korean government chose POSCO’s smelting reduction steelmaking for a national project and contributed KRW 22.2 billion for research and development.

As a result, POSCO started operating the FINEX 2 plant with an annual production capacity of 1.5 million tons in 2007, and the FINEX 3 plant with an annual production capacity of 2 million tons in 2014, which now produces 10,000 tons of molten iron every day. Surprisingly, the Korean steel industry, which was heavily reliant on foreign technologies in 1968, now leads the world’s steel industry in terms of technology.

However, the path to success was filled with challenges.

In 1998, objections were raised against additional investment for the FINEX technology because there were no clear, tangible results even after KRW 60 billion was invested. Even so, POSCO management made a decision to construct a demo-plant with an additional investment of KRW 100 billion for technology development in order to secure long-term competitiveness rather than seeking immediate profit.   

In addition, POSCO convinced steelmaker Voestalpine, who was in possession of the world’s leading technology for molten iron production, to participate in the project as a partner. POSCO was able to do this by offering to cover the full cost of dispatched researchers and engineers should the technology become successful.

In 2003, there was a slight setback when the newly-opened core FINEX processing facility failed to operate successfully. However, after dozens of tests with 80 in-house professionals over 3 months, the facility was up and running.

Molten iron is produced directly in a furnace in the FINEX plant.

Sang-ho Lee, Director in Charge of Commercialization at POIST, said, “With less than 50 years of steelmaking experience, POSCO has managed to achieve a next-generation, innovative steel-producing technology. It feels great because even though POSCO started as a fast follower of foreign technologies, we are now a leading company in the world’s steel industry with our FINEX technology.”

POSCO currently has over 200 patents for its FINEX technology and HCI technology in Korea and 50 patents in more than 20 countries worldwide. Many overseas companies have expressed an interest in FINEX, and POSCO is in talks with world-renowned steelmakers in China to export its FINEX technology.

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In the opening speech, CEO Kwon remarked, “As global economic conditions are rapidly changing, our two countries must work together to expand our cooperative relationship,” and emphasized the protection of free trade and reinforced complementary cooperation between the two countries.

At the general meeting, the panelists of the two countries discussed industries with potential for bilateral cooperation including investment, resources and infrastructure, the 4th Industrial Revolution, and food and agro-livestock.

In particular, the panelists discussed ways to uncover new industries in line with the 4th Industrial Revolution, methods of treating energy waste, and joint development of the health and food industries, and current global issues.

The Korean delegation to this annual meeting consisted of over 50 people, including CEO Kwon, Chairman of SM Group Oh-hyun Woo, GS E&C President & CEO Sang-gi Lee and Lotte International Senior Managing Director Gi-ho Jeong. The Korean council members attended the joint meeting, and visited the Startup Precinct in the outskirts of Brisbane, and discussed the venture firms and start-up ecosystem of Australia.

The AKBC is the only private economic consultative organization of the two countries. It has been promoting bilateral cooperation between the two countries for about 40 years since its establishment in 1979.

Photo cover courtesy of Federation of Korean Industries.

Consider some of the bigger shifts in the US energy industry:

The Shale Revolution

The “shale revolution” has impacted the entire energy system in the US and worldwide. Although the elements of horizontal drilling and fracking had been known for decades, it was the entrepreneurial genius of men like George Mitchell of Houston who found the way to link these technologies and apply them commercially. It resulted in the US going from a natural gas importer to an exporter of pipeline gas and LNG, an exporter of oil (but not a net exporter), and the collapse of prices for gas, LNG, oil and oil products. It reverberated throughout OPEC countries and other major producers like Russia, as well as in major importing countries. It also enabled oil and gas producers to reduce their footprint overseas and focus on domestic production opportunities.

The “shale revolution” has impacted the entire energy system in the US and worldwide. (Source: Bloomberg Business)

Coal Industry

Coal, which had been king in the middle of the last century, has been declining rapidly, losing market share to often cheaper natural gas. The improbable opportunity to ship coal to Germany provided some relief. The Trump Administration may have won the election by making promises to US coal-producing states, but having an impact on this declining industry will take more than rhetoric. While much attention has been given to anti-coal regulation it has been market forces that caused electricity producers to shift from coal to natural gas.

Nuclear Energy

Nuclear energy faces the twin threats of obsolescence, as well as competitiveness with natural gas. The regulatory system also contributes to its decline. Many of the roughly 100 nuclear facilities operating in the US were built about 40 years ago, which means that they were due for major upgrades or retirement now. Only a few new plants are under construction, and they are massively over budget and have been built only in states with regulatory systems in which consumers must bear the cost of such overruns. Conventional wisdom had been that these plants would be upgraded and run for decades more. Instead several have announced shutdowns, and more are expected to follow. Nuclear had been considered a low-cost base fuel, but has trouble with competing with natural gas at current prices.

U.S. President Donald Trump and Secretary of Energy Rick Perry (Source: Fortune)

Energy policy in the Trump Administration, led by Secretary of Energy Rick Perry, is trying to protect both coal and nuclear because of their important role as baseload producers, in contrast to wind and solar that cannot provide consistent power to the system. But it seems doubtful that regulatory mechanisms will overcome market forces.

Falling Prices

The collapse of oil and natural gas prices led to the elimination of hundreds of thousands of jobs worldwide and slashing capital budgets, especially for higher-cost production such as deepwater, the Arctic, and other frontier environments. The shale play was led by small independent companies, but many of them took on too much debt, spent too much money to buy leases from mineral-rights owners, and drilled but often didn’t complete wells because of a focus on future growth. A number of them have failed financially or sold off properties. Even giants like BHP Billiton, which entered the US shale market with a USD 20 billion investment, wrote off USD 13 billion within six years. Although there continues to be substantial financing available from Wall Street, the focus has shifted from growth to cash flow. This has important implications.

But cheaper natural gas has had a positive impact in four areas:

Natural Gas and Oil Pipeline Projects

Natural gas and oil pipelines (midstream) have had a resurgence of activity, both proposed and built. To be sure there have been and continue to be strong challenges by environmental organizations. However, many pipelines have gone forward and others have been suspended because of economics rather than protest.

The U.S. went from an importer to an exporter of liquified natural gas. (Source: The Globe and Mail)

New LNG Facilities

LNG exports are a new phenomenon for the US. For years the US faced a deficit in natural gas, leading to proposals for nearly 40 LNG import facilities. Fortunately, most of them were not built, and those that were have largely become LNG export terminals. These required massive capital investment across the value chain. Greenfield facilities are now planned or under construction in multiple locations.

Expansion of Pipelines to Mexico

Pipeline gas to Mexico is little noticed by the public but the expansion has been dramatic. Despite the liberalization of the energy system in Mexico the demand for natural gas for industry and consumers, especially in Northern Mexico, is likely to continue. There is even talk about an LNG export terminal in Mexico’s Baja peninsula, to be supplied from US sources. The shadow over this is anti-immigrant policies of the Trump Administration and uncertainties related to the renegotiation of the NAFTA trade agreement. There is concern that the upcoming Presidential election in Mexico will result in an anti-US tide that might impact progress on the energy value chain.

Resurgence of the Petrochemical Industry

The petrochemical industry in the US has had a resurgence with low-cost natural gas. Approximately USD 100 billion of investment is currently underway or recently completed in the Texas and Louisiana Gulf Coast.

What we see here are currents moving in very different directions in the extended and complex energy supply chain in the US and internationally.

What does this mean for the steel industry?

Pipelines

Steel is literally the backbone of the US oil and gas system. Hundreds of thousands of miles of pipelines form a complex web across the continental US, in Alaska, to Canada and Mexico, and out to the Gulf of Mexico. Though mostly unseen, these pipelines enable the production and consumption of resources reliably and at affordable prices. New activity will be limited in the Gulf of Mexico for some time, with most of it focused on completing projects that were already underway. There may be some new activity in Mexican waters in the Gulf as the political opening there results in development, much of it in proximity to known fields on the US side of the border.

For example the Keystone XL pipeline, planned to bring more heavy oil from Canada, has been contentious for years for a variety of reasons including the higher carbon content of the crude and the route of the pipeline. Opponents have recently adopted a new strategy suggesting that the project is no longer economic – this is a way to undermine political support. TransCanada, the developer, insists that it is viable and on track. However, in Canada itself, plans have been abandoned for a massive oil pipeline to connect the producing area of Alberta in Western Canada to the east coast.

The Keystone XL pipeline was planned to bring heavy oil from Canada to the U.S. (Source: Horizon Supply Company)

Platforms

The offshore industry has been a major user of steel, both for platforms often built in Korea, and also for the related supply chain. Capital investment has been hardest hit in this area, and may not resume for 3-5 years until global demand increases and production growth slows.

LNG Facilities

LNG is a relative bright spot. The value chain includes the production of gas, transportation to newly-built liquefaction facilities, LNG ships, and import/regasification facilities. Lithuania recently built an LNG import facility to promote its independence from Russia. In other cases, majors like Shell, are now discussing building infrastructure in countries as diverse as South Africa and Vietnam so that they can become gas users. Japan shut its nuclear facilities after Fukushima and has been slow to reopen them. It lacks a domestic pipeline system because of the mountainous terrain and has relied on two dozen LNG import terminals. Will that create demand for new facilities?

An interesting twist is that Kinder Morgan, a leading pipeline company, has defined itself more broadly as an energy transfer organization. It had been frustrated in trying to build a natural gas pipeline from the Marcellus field in Pennsylvania to Boston, where natural gas prices are often the highest in the US. So they have decided to build LNG vessels to transport gas from terminals in Louisiana and Texas to Boston, despite restrictions imposed by the protective Jones Act that requires US vessels and crews for transport between US destinations.

LNG vessels transport LNG between terminals. (Source: World Maritime News)

Shale Gas Wells

The US shale play has been compared to a manufacturing process. Traditional development wells were expected to produce gas for years and oil sometimes for decades. But the fracking operations have a rapid decline curve which means that companies are constantly drilling new horizontal wells and are doing so for greater lengths. More than a dozen horizontal wells may stretch from a single pad. Budgets are now focused on cash flow, which means spending less on acquiring leases and more to produce oil – this results in more spending on steel.

Crude Oil Vessels

The US is now exporting about 2 million barrels of oil per day. US producers had been largely banned from exporting oil until two years ago when outdated legislation was changed. Increased domestic production and the ability to export dramatically changed shipping patterns. Nigeria had been a major exporter to the US but has forfeited the market. Saudi Aramco bought out Shell’s interest in the Motiva joint venture and took complete control of the Port Arthur refinery, the largest in the US. Many observers believe this was to assure a market for Saudi crude. Thus increased trade in oil and shifting markets may create demand for new vessels.

Petrochemical Facilities

Finally, low-cost natural gas has been a constant in the US. In addition to the new construction of petrochemical facilities along the US Gulf Coast mentioned previously, it adds the potential for a reindustrialization of the US economy that was unimaginable just a few years ago. This can cut across many industries for which power costs are a major factor. This may seem inconsistent with e-commerce, but the two may go together as mega distribution centers are built so that a growing fleet of trucks can provide same-day delivery to consumers.

There are many paradoxes in the American energy system and supply chain. For the steel industry, the key is to determine where those opportunities are located.

Bill Arnold is a professor in the practice of energy management at Rice University’s Jones Graduate School of Business. Previously, Arnold was Royal Dutch Shell’s Washington director of international government relations and senior counsel for the Middle East, Latin America and North Africa for 16 years.

Cover photo courtesy of Petroleum Economist.

The REI Expo is one of the world’s largest new and renewable energy exhibitions. More than 725 companies from 40 countries participated in the Expo, along with approximately 50,000 visitors. The turnout was largely due to the Indian government’s infrastructure expansion and intensive investment plans for new and renewable energy.

POSCO’s Booth at REI 2017 showcased PV structures made of PosMAC steel.

POSCO India’s booth at the event showcased its solar PV structures made of PosMAC steel to major solar companies and structure manufacturers such as Adani, Nextracker, Arctech, Softbank, Purshotam, etc.

During the Expo, Memorandum of Understanding (MoU) agreements were signed with four companies. POSCO India’s Chief Managing Director Gee Woong Sung said, “By the end of this year, we will complete the Indian solution marketing system, which will supply not only steel but also solar PV structures. In 2018, we will further expand PosMAC sales in India.”

POSCO India signs an MoU with Ganges Internationale.

In addition to showcasing their premium product, POSCO has been working hard to meet customer demands in all areas. In order to meet short delivery times and structural supplies required by various PV projects in all parts of India, POSCO India has decided to establish a PosMAC structure supply chain system through strategic cooperation with local construction companies.

In the first stage of development, the free space at POSCO-IAPC located in Ahmedabad will be utilized via a long-term lease, and the manufacturing machinery is being installed with an operation target set for October. In the second stage, POSCO India has plans for additional installations in the Delhi and Pune regions.

POSCO India will strive to build a differentiated sales network with its solution marketing activities and secure a sustainable competitive advantage over other companies through its premium-quality products and advanced supply chain system.

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According to research by McKinsey, approximately 51 percent of all job-related activities in the U.S. can be replaced by robots. Another recent research conducted by PwC shows that 40 percent of jobs in the U.S., 31 percent in the UK, 35 percent in Germany and 21 percent of the jobs in Tokyo are vulnerable to replacement by robotics or other artificial intelligence (AI).

An imagined image of an all-robot workforce (Source: Digital News Asia)

The figures are daunting, but in practice, companies have yet to realize a fully-automated system that matches human labor. The truth is, humans need robots to take over mundane and physically demanding tasks, while people take on creative and innovative roles in the workplace. What is more likely is a shift in workplace dynamics, not a decrease in the overall number of jobs available. Today, most companies have automated their systems to varying degrees, and robots are continually being upgraded.

The Human-Robot Collaboration

Last year, the International Organization for Standardization (ISO) published ISO/TS 15066, the safety standards for collaborative robots, or cobots that work in the same workplace as humans simultaneously. Before, it was common to find robots restrained in cages, or shut off while human workers loaded equipment onto the robots. Now, with enhanced sensors and diverse power settings, the safety risks of working with cobots are low. To add, many industries are embracing cobots over traditional industrial robots that work alone, because cobots are less expensive and require much less energy to operate.     

A welder gets help from a cobot

Not only are they a sustainable solution for companies, they increase workers’ productivity. According to Business World, Julie Shah and her team at the Massachusetts Institute of Technology conducted a study looking at human-robot collaborations at a BMW plant. She found higher levels of productivity, efficiency and performance when humans and robots collaborate in comparison to all-human or all-robot systems. Collaboration also reduced human idle time by 85 percent. Many argue that this increase in productivity will lead to more business and eventually create more jobs that revolve around working with cobots.

The International Federation of Robotics (IFR) found that robot-driven productivity accounted for 10 percent of total GDP growth in OECD countries from 1993 to 2016, and that number will continue to grow in the coming years. The IFR predicts worldwide usage of industrial robots to reach 2.6 million by 2019. That’s one million more robots than in 2015.

Cobots are already making their way into factories and warehouses, and human workers are learning to work with their new counterparts.

Auto Industry

The automotive industry is one of the most common places to find cobots as major automakers were early movers in incorporating robotics into the workforce. That’s why it’s the perfect place to observe the changing dynamics of the workplace with cobots. At Ford’s new production facility, cobots work shoulder to shoulder with the production team in what they call a blended solution. Mostly, cobots have taken over repetitive tasks, physically demanding or dangerous tasks and freed up workers to focus on new innovations and creative projects. The facility runs 21 hours a day, 6 days a week thanks to around 550 cobots and robots.

Take a look at the new working dynamics at Ford below:

Food Industry

The food industry is another sector ripe for human-cobot collaboration, especially in the packaging sector. However, pizza restaurant Zume is changing the delivery pizza experience with automated technology. Cobots have taken over tasks such as spreading the sauce and lifting the pies into the oven. They will be implementing more robot technology to free up kitchen staff to work in their offices for business expansion. Another addition to come is a delivery truck equipped with 50 ovens that will start cooking the pizzas based on exactly calculated arrival times.

Watch the video below to find out more about what Zume is working on:

E-Commerce Industry   

Amazon is another early mover that introduced 15,000 cobots named Kiva to their warehouses in 2014. Two years prior in 2012, they bought Kiva Systems, a robotics company, for USD 775 million. Since then, the number of cobot employees has tripled.

Here’s how it works. Human employees scan items and place them into the shelf-like pods. Instantly, the scanned item is available to purchase online. Kiva’s software keeps track of where each item is so that it can easily be found at the picking station, where a human employee retrieves the product for shipping. Amazon managed to rapidly increase efficiency and speed up delivery times with Kiva. They continue to incorporate AI into their services, including their drone delivery system.

Take a look at Kiva in action in the video below:

Healthcare Industry

In the healthcare industry, cobots are being incorporated to assist doctors in surgery and lighten the burden of caregivers by taking over mundane tasks. Pairing cobots and their software technology with doctors has several benefits including minimized invasiveness, exactness and reduced mistakes in surgical procedures. To date, AI and cobots have allowed doctors to access new parts of the human body for surgery, and achieve breakthrough feats the way they examine, monitor and operate on patients.

Take a look at the most innovative cobots to date in the healthcare industry:

Steel Industry

POSCO is a leader in applying AI to the steel production systems. In 2015, they developed an exoskeleton cobot designed to enable workers strength beyond their own. The cobot is made of carbon fiber, aluminum and steel, and was first tested with Daewoo Shipbuilding and Marine Engineering, at their facility in Okpo-dong. The cobot enabled shipyard workers to easily lift heavy pieces of metal weighing around 70 pounds, and researchers are working to allow workers to lift up to 200 pounds effortlessly.

Watch the video to find out more:

Aside from cobots, POSCO also incorporates AI and IoT into their smart factory, the first smart steel factory in the world, and continues to research and develop smart solutions to optimize the production processes.

Continued automation and the incorporation of cobots in the workplace is inevitable, and governments and institutions will have to provide resources for people to fill jobs tailored to working with cobots or those that cannot be replaced in any way by robots and AI. What’s ahead is figuring out how to think of cobots as coworkers that will only enhance one’s work. Also, companies have to figure out how to fully realize the potential for increased economic productivity through this type of cobot co-work that will lead to the development of more innovations, technology and ultimately, new business ventures.

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