Special report: EU steel mulls Asia-style digitization

Digitization the Asian way – with a swathe of the latest IT solutions rolled out across various sites in a matter of weeks – might not be suitable for Europe with its older infrastructure, plants and old-school workers. In addition, digitization itself is really only a transition period, overshadowed by the bigger movement called “Industry 4.0” in Germany, “Industrie du Futur” in France and “Catapult” in the UK, where the mastering of other processes and tools (e.g. automation, sensors, changing a workforce’s mindset) are just as important, S&P Global Platts heard during Eurofer’s recent European Steel Day 2017.

Limited funding, the increasing age of firms’ capital assets and personnel, a cautious approach to change, plus over-careful premeditation were cited as the key features preventing European steelmakers from making choices on IT solutions rapidly, as is the case in Asia.

“It’s much easier if you build a new plant in China where you start with an absolutely new technology. In Europe, the industry is comprised of mostly brownfield enterprises with existing IT technologies. We cannot replace them from one moment to another,” said Harald Peters, head of the Measurement and Automation division at VDEh-Betriebsforschungsinstitut (BFI) – the institute for applied research and development in steel technology.

European governments and companies should focus more on investing in infrastructure starting with fast internet access for all, according to Reinhard Bütikofer, a member of the European parliament’s industry research and energy committee.

The issue of insufficient investment activity and funds emerged repeatedly throughout the event. “The EU Commission has spent €20-22 million ($22.4 million-$24.7 million) on future-orientated projects over the last 10 years. It’s nothing if you want to create breakthroughs,” said Peters.

The Research Fund for Coal and Steel (RFCS) is the only EU government fund dealing directly with steel research. For European steel companies, it is difficult to get funding from other sources, some said.

“As a steel industry, we tried to apply several times to Manufacturing the Future (a program run by UK government agency, EPSRC, investing £800 million/year ($1.03 billion) in engineering and the physical sciences) because they have much more money than RFCS – one call at Manufacturing could fetch double the RFCS funding we have for one year, ” Peters said. “But it turns out that if you want to get this funding, you have to achieve 35% energy savings with your proposed solution: it is impossible to do this with one technological change or application, as the steel industry is already running at near- optimum. The message is that we need more instruments for funding research.”

“Germany has led the way in this area with Industry 4.0. Its steel workers have been very constructive in their attitude with regard to digitization and the government is putting money on the table to push digitization, but if you compare this with what the Chinese are doing, that’s [the latter] a hundredfold [larger],” Bütikofer said.

Andreas Goss, CEO of ThyssenKrupp Steel Europe, said he had been to Asia many times and one thing was clear to him. “Even without contemplating it, they are embracing digitization as a way of life. I don’t want us to fully replicate this, but as we are facing a competitor who acts in this way we must at least ponder and make a decision to what extent we want to go that way,” Goss said.

Peters shared his own encounter with sorting out Chinese-style digitization. “One Chinese company ordered an IT solution for a research organization and asked for it to be ready in two weeks. After two weeks, it requested of the organization: ‘Please roll out your IT solution across our many different sites.’ That’s the difference; in Germany, we think again and think once more again, trying to foresee the consequences and in the meantime the others [Asians] are just doing it,” he said.

That said, Francisco Verdera Mari, director at the European standardization body CEN CENELEC, cautioned against doing things with the same vigor and speed. “Technology companies, selling to steel companies, are often driven by the solutions that they sell. It’s important to see exactly which solutions steel companies and steel buyers need and then develop the case for these specific IT applications. Otherwise, there is a risk of investing a lot of money in technology that is not adapted to our sector needs and leaves us without a result,” he said.

According to Mari, more study may be needed. “We are facing completely new challenges. Industry 4.0 is beyond just digitization: the steel sector has been digitalizing processes for a long time, but now new elements are being introduced such as sensors talking to sensors,” he said. “And who knows if data obtained by sensors is not going somewhere else, maybe to an industrial spy, a competitor, a tax authority or someone who wants to know what you are producing. There are still many issues with regards to cyber security and functional safety.”

Ekaterina Bouckley, PLATTS