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.

Stephen Zoepf is the executive director at the Center for Automotive Research at Stanford University.

To kick off the forum, Stephen Zoepf, executive director at the Center for Automotive Research at Stanford University gave a presentation called “Electric Vehicles: Adapting to a Changing Marketplace” to share his insights on what future markets will look like and implications for automakers, suppliers as well as consumers.  

Here are the key takeaways.

The Future is Going to Look Very Different

According to a report by RethinkX, an independent research group, 6 trillion U.S. passenger miles will be driven in 2030, up 50 percent from 2021. Of those miles, 95 percent will be driven in self-driving, electric and shared vehicles and only 5 percent of those miles will be driven by internal combustion engine (ICE) vehicles.

The report goes on to say that autonomous EVs (A-EV) will make up 60 percent of the U.S vehicle stock, and those vehicles will be part of a shared-mobility service. As more people start to share cars, the overall number of vehicles on U.S. roads will drop from 247 million in 2020 to 44 million in 2030.

SEE ALSO: Going Autonomous: The Transformation of the Transportation Industry

The change is already happening. In 2016, shared-mobility companies such as Uber and Lyft drove 500,000 passengers per day in New York City, which is triple the number of passengers from 2015. Today, more and more automakers like Tesla and GM are also entering the shared-mobility market.

EVs are already becoming prominent in major cities around the world. (Source: Time)

The findings illustrate a future where people drive more miles with fewer cars, which are fueled by electricity, and shared instead of owned. It’s a radical visualization of the future, but one that is driven by economic forces.

By 2021, shared vehicles will be 4 to 10 times cheaper per mile than private vehicles, and American households will save an average of USD 5600 every year by switching to shared EVs from cars fueled by gas, according to RethinkX.

Zoepf shared another report by ARK investment Management which echoes the finding above- in the next ten years, people will drive three times more kilometers using half the number of cars and the number of EVs on the road will increase 10 fold.

What It Means for Car Manufacturers and Suppliers

A shrinking vehicle fleet consisting of mostly EVs can only mean one thing: a major disruption to the current automotive market.  

Right now, the average lifecycle of a car in the U.S. is 11 years. However, the majority of a car’s total mileage is driven in its early years. It’s the same for shared vehicles, but they are driven about 80,000- 90,000 km per year, 10 times the distance of privately-owned cars. What this shows is a compression of the vehicle lifespan in its first 3 to 4 years.

These statistics pose critical concerns for automakers.

Will overall vehicle sales decrease in the coming future? According to Zoepf, that’s the wrong question to ask. Instead, automakers should be asking “will I make money?” Automakers have a couple of choices. They can either adapt early on and manufacture EVs and/or A-EVs at a competitive price, or become a shared-mobility provider. Early movers such as Tesla, GM and Volvo are already shifting their business strategies to fit these models.

GM recently launched Maven, a car-sharing service. (Source: The Verge)

Another question to ask is how these trends will affect vehicle design. With shortened vehicle life-cycles, manufacturers can either design cars to last only 3 to 4 years for quick replacements, or opt for the aviation model where the vehicle will be built to last, but the interior parts, such as seats, will be replaced frequently. Whatever route manufactures choose to take, gaining a competitive edge in vehicle and service quality early on will be key.

What Will This Mean for Vehicle Material Suppliers?

If building cars to last is no longer a primary priority, will car makers downgrade their materials? The short answer is not a chance.

Through a customer survey study Zoepf conducted of 60,000 Zipcar customers, he showed that the number one factor when choosing a car is safety. However, there is no one, ideal model or type of car that is preferred in a shared mobility framework. The purpose of the trip determines the type of vehicle, and the success of a shared mobility service provider will depend on the variety of cars it can provide – all with competitive safety ratings.

POSCO ICT already has ChargEV stations set up across Korea. (Source: POSCO ICT)

The supplier’s role will be to continue providing high-quality materials that can boost the safety and cost competitiveness of future vehicles. Steel suppliers have to keep developing lightweight and high-strength steels like POSCO GIGA STEEL, and research new materials that can boost the competitiveness of EVs such as POSCO’s Hyper NO for motor cores, battery materials and POSCO ICT’s EV charging service and infrastructure.

There remain numerous challenges that lie ahead for a greener and safer future with EVs and A-EVs, and it might take longer than experts predict for lawmakers, corporations and consumers to all agree on an optimal mobility model. However, change is already underway and automakers and suppliers alike need to strategize and adapt early on to take advantage of the upcoming opportunities.

For more information on how advanced automotive steel can benefit automakers looking for lightweight and sustainable steel solutions, take a look at our infographic on POSCO GIGA STEEL or read the full report here. 

Cover photo courtesy of GOV.UK.

At POSCO, there are many talented researchers, engineers, and factory workers, who are working constantly to make steel stronger, lighter, and longer-lasting. The Steel Wire sits down with three of those POSCO employees who have played essential roles in helping to establish POSCO as an industry leader in automotive steel solutions.

Q1. POSCO has relied on its experts to become an industry leader in advanced automotive steel manufacturing, and you have all played important roles within POSCO’s development of automotive steel. Can you tell us about the fields you are in and what your role has been?

[Shin Seung-cheol] For the last three decades, my main focus was to secure POSCO’s position as an industry leading automotive steel producer. Currently, I am at Gwangyang Steelworks working to create steel innovations and develop new technologies.
[Cho Byeong-ho] I work in the cold rolling department at Gwangyang Steelworks. Since joining POSCO in 1990, I have been working to develop World Premium Products, which account for 70% of the cold-rolled products manufactured in my department.
[Lee Jin-soo] I began my career at POSCO in 1993 working as a sales engineer in Indonesia and Singapore. After that, I moved to Gwangyang Steelworks where I was in charge of establishing technology strategies for automotive steel sheets as well as producing Tailor Welded Blanks (TWB). More recently, I guided the completion of Thailand CGL in 2016 to help POSCO be more competitive in the SE Asian market. Now, I serve as the corporate head of POSCO-Thailand Coated Steel (TCS).

“POSCO’s mission in 2009: Develop the best, most advanced automotive steel solutions that only POSCO can produce.”

Q2. Starting is often the most difficult step and we have sure faced some hurdles along the way. Can you tell us about the some of the problems you faced while developing automotive steel products?

[Shin Seung-cheol] Sure, in 2009, our team’s goal in the rolling sector was to ensure the productivity and quality of the World Premium Products. In the annealing process of the cold rolling sector of the Gwangyang Steelworks, I was told to make “the best automotive steel plates.” However, compared to other products, automotive steel plates demand a much higher quality than other products, and our equipment was outdated and rundown, making it almost impossible to create the flawless steel plates that were required. Achieving both high quality and continuous mass production required a new level of innovation.

[Cho Byeong-ho] When I was at the cold rolling mill, we were facing challenges from both domestic and foreign competitors. So, we streamlined old equipment and increased production of the World Premium Products such as automobile steel plates and high-grade steel. However, there were many problems. At one point, the cold rolled steel kept falling off before reaching the rolling process.

Q3. There’s a famous quote that says ‘Patience is bitter, but its fruit is sweet.’ Does this make sense when you think about the work you accomplished in developing advanced automotive steel for POSCO?

[Shin Seung-cheol] Yes, that quote rings true for our team. After three years of testing the steel surface quality and improving the Continuous Annealing Line (CAL) facility, we eventually succeeded in securing high-quality automotive steel plates. Strict management standards along with systematic & rigorous product inspections from the customer’s point of view were also put in place in order to ensure that the products met the client’s needs.

[Cho Byeong-ho] When we couldn’t keep the steel from falling off before reaching the rolling process, we decided to visit the cold-rolling mill at Pohang Steelworks to help us find a solution. There, we worked on solving the problems with a small-scale laser welding team and we got support from maintenance experts. With proper facility training and data improvements, the 2nd cold rolling mill was ultimately able to work consistently.

“Now, it’s more than a mission. We will be the leading automotive steelmaker in Asia.”

[Lee Jin-soo] Thanks to our team’s endless efforts, POSCO was able to succeed in producing highly competitive automotive steel. POSCO provides around 150,000 – 200,000 tons of galvanized steel plates to Thailand every year. But we did not want to be #1 only in Korea; we wanted to have a stronger presence in the growing Thai market as well.

In order to expand our presence in the Thai market and provide stable supplies to existing clients, we differentiated ourselves from competitors through the quality of GI products for home appliances and painting – areas where we held a competitive advantage.

Q4. Your passion for finding innovative solutions, as well as your success at POSCO, is impressive. What are some of the most meaningful accomplishments you have made at POSCO?  

[Shin Seung-cheol] I was very grateful to be named as one of the POSCO Masters of Korea in 2016. This honor is reserved not only for the best field technicians with the highest levels of skill, but also for those who help their coworkers by sharing their expertise. I was happy to be acknowledged for my own skills as well as my efforts to help others.

[Lee Jin-soo] I am proud that I was able to be a part of the efforts to bring two manufacturing centers in Mexico online. POSCO-MPPC plant 1 & plant 2 were POSCO’s very first overseas construction sites and were very important for the future of POSCO’s global growth. And recently, getting the chance to guide Thailand CGL to its opening was very important for POSCO and very meaningful for me.

[Cho Byeong-ho] When I started, I believed that it would be really helpful to gain knowledge about each part of the steelmaking process. As a result, I taught myself about each step and acquired certificates in various fields including ‘Master of Craftsman Welding’ and ‘Master Craftsman of Rolling.’ This allowed me to do more specialized work for POSCO and for its automotive steel solutions.

Q5. Lastly, please share with us your vision moving forward.

[Shin Seung-cheol] While I’m somewhat confident in my operational skills after 34 years on the job, I still want to study more. I want to learn more about engineering theory and process development. My dream is to become the best possible technician I can be.

[Cho Byeong-ho] Moving forward, I want to continue the work to boost our equipment capacity while also improving our technology so that we can continue to produce the best World Premium Products.

[Lee Jin-soo] At Thailand CGL, we want to move forward to provide manufacturing technologies, such as mold technology and automotive steel sheet buying channels, to small local companies. This will allow POSCO to expand its contract base into a solution marketing system.

The advancements made in POSCO’s advanced automotive steel are driven by people like Shin Seung-chel, Cho Byeong-ho, and Lee Jin-soo. Without their determination, intelligence, and innovative thinking, POSCO could not be where it is today.

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