POSCO recently completed STEP development, and applied it to the hull of Hyundai Samho Heavy Industries’ ships. STEP is a thick plate product with varying thicknesses that form a gentle slope on a single steel plate. Applying STEP will enable shipbuilders to skip the welding process, reducing labor costs and delivery time. POSCO is the only domestic steel maker to have developed the technology on its own.

Employees of the two companies are standing in front of the hull that was assembled using STEP.

In shipbuilding yards, the thickness of thick plates varies depending on the amount of pressure applied during construction. As the welding of thick plates of different thicknesses involves excessive man-hours, back-end processing is occasionally delayed. In order to help its partner overcome such difficulties, POSCO began to develop the technology for STEP in 2015 in collaboration with Hyundai Samho Heavy Industries. They acquired a classification certification last March for the technology and successfully applied it to an actual shop after several field application tests.

STEP is also expected to benefit domestic shipbuilders currently suffering from the recent global recession of the shipbuilding industry, by helping them reduce costs and increase productivity. Shipowners will also benefit from the improved quality and shortened inspection time.

VP Sang-gyun Lee of Hyundai Samho Heavy Industries explains the development progress of the hull block at the ceremony held to celebrate the first application of STEP.

Officials from Hyundai Samho conveyed to POSCO the difficulties they had on the shop floor over the years before applying STEP, and said, “The use of STEP is expected to secure working space, reduce bottlenecks and welding man-hours, and thus save costs by more than KRW 60 million per ship.”

POSCO is planning to mass-produce STEP starting next year, and expand its application to other industries, such as bridges.

Don’t miss any of the exciting stories from The Steel Wire – subscribe via email today.

Why is the Shipbuilding Industry Behind in Technology?

The advent of container ships dates back to 1956. About a decade later in the 1970s, there was a boom in demand for container ships along with the industrial revolution. Then, demand boomed again during the dot-com bubble. The bubble burst in 2001, and the world faced yet another recession in 2008. From this slowdown in overall trade and economic activity, the world now has an oversupply of container ships, and economists project it will last up to 2025.

The Ideal X leaving Newark, New Jersey in 1956 (Source: Wired)

This is bad news for the shipbuilding industry as well as their supplies. In fact, during the first half of 2016,  a reported 20,000 people from the shipbuilding industry lost their jobs in Korea, the third largest shipbuilder in the world. Steel suppliers were also hit hard with China’s oversupply of steel crowding out the market.

Not All Signs Point South

First of all, the global export to GDP ratio is projected to increase from 30 percent in 2015 to 33 percent in 2035. According to the World Trade Organization (WTO), in 2017, there has been an estimated 2.4 percent growth in the overall volume of trade, and an additional 2 to 4 percent projected for 2018. Export orders and container shipping have increased in 2017 as well. With 90 percent of the world’s trade goods transported via ships, things are looking up for the stagnant shipbuilding industry.

Another piece of good news for the shipbuilding industry and environmentalists came at the end of 2016 when the International Maritime Organization (IMO) announced the new global cap on the amount of sulfur for marine fuels at 0.5 percent by 2020. With full compliance, it will result in an 85 percent decrease in global S02 emissions.

The IMO announce the 2020 emissions cap (Source: Interfax Energy)

The outlook of global trade and the new IMO emissions cap will mean new business for shipbuilders as well as their suppliers. Operators working with ships and fuel that meet current emissions requirements will have to either modify their vessels, opt for low-sulfur fuel or turn to alternative solutions such as Liquified Natural Gas (LNG).

Scrubber Solutions  

Remember the overproduction problem mentioned earlier? Not every company has the financial resources to build brand new, eco-friendly ships or switch to low-sulfur fuel. At the moment, low-sulfur fuel is about 50 percent more expensive than low-grade bunker fuel. Nearing 2020, those prices are projected to increase a lot, due to skyrocketing demand.

An alternative way for ship owners to meet the IMO emissions cap by 2020 is installing scrubbers. Scrubbers are exhaust gas treatment plants that use water to clean the gas exhaust produced by ships before it is expelled into the air. They typically require 1 to 2 percent of total main engine power to operate and cost an estimated USD 5 million to install.   

A scrubber for a HFO-fueled ship (Source: Wartsila)

UBS Limited reported that about 19 percent of ship owners will embrace scrubbers as solutions while about 74 percent will turn to low-sulfur fuels.

Already, companies are jumping aboard. Technology company Wärtsilä will install their scrubber system to two 56,000 DWT Handymax bulk carriers for NYK Bulk & Projects Carriers Ltd. in Japan. The vessels are scheduled to be completed by 2018 and 2019, and will meet the new IMO sulfur emissions cap. Dutch company Spliethoff will also install scrubbers on six of their multipurpose vessels to be built in 2019 and continue burning HFO.

A Zero-S02 Emission Solution

Many of the carriers in operation today can run on several different types of fuel, including LNG. Even among concerns about the lack of facilities accompanying LNG, it is favored by suppliers, manufactures and environmentalists alike. Burning LNG emits zero S02 and particulate matter, and up to 25 percent less C02 and up to 90 percent less nitrogen oxides (N0x).

An LNG carrier heading to Brazil (Source: LNG World News)

An increasing number of companies are investing in the LNG solution.

Energy company Shell acquired LNG producer BG Group in 2016 for USD 50 billion; Volkswagen will employ two LNG carriers to ship their products between Europe and North America; and as of August 2017, three new shipbuilders joined SEA/LNG, a non-profit coalition that advocates the use of LNG for ships. Mitsui, Novatek and Sumitomo are the latest of the 29 members.

Although LNG is by far the most environmentally friendly solution for the shipping industry, it requires more space and adds weight to a vessel, using up more fuel. Shipbuilders need thinner and lighter material solutions to cope with this issue.

Eco-Friendly Material Solutions

All of this is why Hyundai Mipo Dockyard chose to build the world’s largest LNG-powered bulk carrier using POSCO’s High Manganese Steel. The vessel will yield up to 50,000 tons of cargo, seven times more than existing LNG carriers. The high manganese component allows the LNG to be kept at the freezing temperatures of -162℃. It out performs other traditional materials in strength, toughness and cost effectiveness. The carrier will be in operation in Korea beginning in 2018.

Workers building a ship at Hyundai’s shipyard (Source: AQT Solutions)

POSCO also supplies stainless steel for Korea Gas Corporation’s membrane-type LNG carriers starting from 2016 and is the world’s only supplier of stainless steel for membrane material.

The projected overall increase of worldwide trade and new environmental regulations will place a financial burden on ship owners. However, it is an opportunity to generate business in different sectors of the shipbuilding industry such as in parts manufacturing, energy and steel supplies. Such parties need to continue to find solutions to modernize vessels and comply with global standards to meet the demands of world trade in the very near future.   

Don’t miss any of the exciting stories from The Steel Wire – subscribe via email today.

POSCO has recently announced that its high manganese steel, independently developed for the first time in the world, will be used in building the fuel tank of the LNG- LNG-powered bulk carrier. To be built by Hyundai Mipo Dockyard, a versatile Korean shipbuilding company, the LNG-powered bulk carrier will include high manganese steel supplies from POSCO beginning the third quarter of this year.

The largest cargo capacity of any existing LNG-powered bulk carrier has been 7,000 tons so far, but the new ship will be able to carry 50,000 tons of freight, which is about seven times more than its precedents. It will also feature an energy-efficient, eco-friendly dual fuel-capable engine that can run both bunker C oil and LNG. The ship will be completed by the end of next year to be used beginning 2018, and will carry limestone materials from Gangwon-do to Gwangyang Steelworks for POSCO.

POSCO’s High Manganese Steel has Better Performance and Price Competitiveness than Other Alloy Materials

Because POSCO’s high manganese steel contains about 20% manganese, it has the capability to store LNG, which requires to be kept at an extremely low temperature of -162℃. This high manganese steel-made LNG tank is superior to the currently existing nickel or aluminum alloy-made tanks in terms of yield strength, the minimum temperature it can hold, toughness and price.

Since the ship is designed to sail across the ocean, it will be built based on the IFG Code, an International Code of Safety for Ships using Gases or Other Low-flashpoint Fuels. It looks like the high manganese steel will be more likely to be chosen as a material that can handle extremely low temperatures by the International Maritime Organization once the ship sets sail.

POSCO plans to jointly build an overseas market for high manganese steel, with domestic shipbuilders like Daewoo Shipbuilding & Marine Engineering that have a mutually close cooperative relationship.

Be sure you never miss any of the exciting steel stories from The Steel Wire by subscribing to our blog.

The Background and Story on Solution Marketing

POSCO’s technology-based Solution Marketing blends technology support with marketing activities to solve customer problems which allows customer value to be strengthened. It can be divided into five steps: 1) Industry·Market Analysis, 2) Solution Development & Care, 3) Solution Release & Promotion, 4) Support and Accelerated Sales, 5) Enhanced Customer Relationship Management.

Solutions provided from the steel industry come in the form of a combination of rolled steel (hardware) and utilization technology (software) which can be modified based on market situations and customer demands. By offering such solutions, POSCO is looking towards not only meeting customer demands but also to greater profitability by aggressively expanding sales of high-grade steel.

An Example of Solution Marketing

Until now, POSCO has used EVI to find customer needs first and then sold the appropriate kinds of steel. The new Solution Marketing is not only about finding customer needs, but also proactively finding the necessary technologies and workforce. During an internal presentation for POSCO employees, CEO Kwon used automotive steel sheets as an example of Solution Marketing.

He explained, “Although automotive steel sheets require high strength, if this compromises its formability, auto companies can face difficulties since weldability opportunities for car design decrease. In order to reduce problems that high strength steel used for light weight benefits can create, POSCO is providing molding and welding technologies, as well as, evaluation methods. By supplying more than just the steel hardware, we can provide our customers with optimal solutions. This is Solution Marketing. Instead of limiting to a single product, we must provide a “package” solution for our customers.”

Meeting with Domestic Shipbuilders to put Solution Marketing into Action

POSCO has sought to improve the domestic ship building industry through building trust, sharing visions, and providing win-win technology-based solution marketing to increase value for customers.

In order to strengthen “Solution Marketing” that is mutually beneficial to POSCO and its clients, CEO Kwon has made in-person visits to meet with clients in the shipping building industry including Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME), in order to promote and underline Solution Marketing.

Make Listening to Client Needs a Priority

On April 4, 2014, CEO Kwon went to Ulsan to meet with the Jaesung Lee, CEO of Hyundai Heavy Industries. After having a meeting and touring the facilities, he made his way to meet with the head of Samsung Heavy Industries to discuss ways to strengthen cooperation.

Pictured here: POSCO’s CEO Ohjoon Kwon listening to a presentation about LNG Vessels by Daeyoung Park, CEO of Samsung Heavy Industries

During these meetings, CEO Kwon was able to listen to client needs and promote POSCO’s Solution Marketing. During his meetings with clients that week, CEO Kwon said, “In order to recover from the global economy downturn, shipbuilding and the steel industry must strengthen mutual trust and cooperate for quick recovery.”

Pictured here: POSCO’s CEO Ohjoon Kwon meeting with Jaesung Lee, CEO of Hyundai Heavy Industries on his visit to Ulsan on April 4, 2014

On April 21, 2014, CEO Kwon went to Geojedo Island which is where one of the dockyards for POSCO’s customer, Daewoo Shipbuilding & Marine Engineering, is located. He met with the Jeho Ko, CEO of DSME, and visited sites just like he had done in Ulsan. On this day CEO Kwon emphasized, “POSCO is focusing on strengthening its competitiveness to be the global top company. Using technology-based Solution Marketing, we hope to substantially contribute to improving value for our customers.”Pictured here: POSCO’s CEO Ohjoon Kwon in Geojedo Island during a visit with DSME on April 21, 2014.

How Solution Marketing fits into the Future for POSCO and Its Customers

Pictured here: Offshore plant utilizing POSCO steel

Daewoo Shipbuilding & Marine Engineering and other Korean shipbuilders are making developments for LNG vessels for polar regions, deep sea offshore plants, eco-friendly and efficient ships. Therefore, it is crucial that POSCO can continuously supply the necessary materials to foster such advancements. In the past, technology advancements were based on meeting client needs. However, in the present, it is important for POSCO to anticipate material developments to grow and make advancements together.

POSCO also plans to reinforce R&D strategies and consolidate strategic partnerships. In addition, POSCO aims to provide materials necessary for individual customer projects. The responsiveness to customer needs in terms of product quality, size and more must be met in order to improve the overall satisfaction of POSCO’s customers. As such, strengthening Solution Marketing will be an important tool to make value-added offerings a reality.

Case Study for Solution Marketing: Fast Response to Steel for Ships and Technology Development

A good case study for Solution Marketing is how POSCO quickly created steel products for shipbuilders to use after the International Association of Classification Societies (IACS) created new regulations to improve ship vessel stability. Soon after the IACS announced these changes, POSCO developed technologies to provide steel products and technology that would meet these new standards. Customers in the shipbuilding industry could utilize POSCO’s solutions to design new ships. The pre-emptive technology development and quick response from POSCO allowed domestic shipbuilders to design and construct ships without delays and helped POSCO customers increase their value.

In the coming months and years, POSCO will continue its efforts to make advancements for customers across various industries by building trust, sharing visions, and cooperation for technology advancement and cooperation. Solution Marketing is a strategy that can help POSCO become “POSCO the Great”.