THOUGHTS

How can Benchmarking Help Improve Cost Competitiveness in the Steel Market?

Jan 30, 2018

Steel is one of the top products in the manufacturing sector, and the market is getting intensely competitive with each passing day. Over the past couple of years, the global steel industry has been booming due to liberalization policies and increased infrastructural works. The fierce competition in the steel market can be undermined by the rise of Asian countries, such as India, ending the dominance of the USA. One of the biggest challenges faced in the steel market is to contain costs and increase the efficiency of their assets. Although individual players are well aware of their production assets, there is very little transparency about the cost-saving capabilities across the industry. As a result, cost benchmarking becomes a major challenge for players in the steel market. Instead of IR_Brochurefocusing on resource utilization alone, working with multiple operating points can yield a better result to overcome cost challenges.

Importance of overcoming the cost challenge

The demand in the steel market is primarily driven by the increasing the use of metal packaging materials, which is increasing at a faster rate compared to the GDP growth in the emerging markets. However, the use of steel as a packaging material is facing some stiff competition from alternatives such as aluminum, plastics, and composite materials. As a result, companies in the steel market are fighting hard to gain attractive volumes in the international steel market to tackle cost competitiveness. The global steel prices are mainly determined by two significant factors namely, overcapacity in China and low transportation costs globally. For instance, importing steel from other countries wasn’t considered to be economically viable, but low-cost global transportation has made it possible to source rebars from Turkey and hot-rolled coil (HRC) from South Korea. Additionally, for a few years in a row now, players in the steel market are facing overcapacity issues with utilization rates lingering at a low 70%, which is far from the healthy threshold of 80%.

How can benchmarking help overcome cost competitiveness in the steel market?

Steel manufacturers in the recent past have looked on to numerous large-scale programs to bring operational transformation and cost reduction in the steel market. They have resorted to benchmarks, including lean manufacturing and six sigma to eliminate waste, minimize production errors, and increase end-value for the customers. Steel manufacturers have shifted their focus to these areas to overcome cost competitiveness:

  • Companies in the steel market can improve their energy and material efficiency by looking at numerous methods including reducing yield loss in steelmaking, reducing the consumption of energy and consumables, and reducing the fuel rate of the blast furnace.
  • Manufacturers can look for ways to reduce wastage by implementing strict rules for input raw material, which will minimize the amount of rework and scrapped material.
  • Investing in automation and increasing the skill set of operators will directly improve labor productivity and optimize the
  • Increasing efficiency in maintenance, for instance, the wrench time of the maintenance workforce can be improved through the better planning and scheduling of maintenance tasks
  • Following a shared-services approach for group functions can help streamline sales and general administrative
  • By examining the total cost of ownership of various alternatives, players in the steel market can reduce their external spend when purchasing materials and services.

To know more about how benchmarking can help overcome cost competitiveness in the steel market:

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