COVID-19 impacted global economy, human sentiments and all related activities. Due to the lockdown and reverse migration of labourers, the construction and automobile industries suffered the maximum. Eight per cent of steel consumption is towards construction and automobile slumped.
In the Third Industrial Revolution, Information Technology (IT) started booming and analogue technology was transformed to digital. Computers, microprocessors, cellular phones and the Internet transformed the traditional production and created a foundation for future digitisation. In recent years, the digitisation of production has become increasingly smarter. With the popularisation of the concept of Industry 4.0.
The world's steel demand contracted by -13.3% over the year. Surprising China grew by 8%. India’s and Global GDP contracted considerably. 30% of global steel-making capacity was idled. In India, steel consumption declined by 13.7%, recording 88.5 MnT in 2020 vs 102.6 MnT in 2019.
Even with so many negative forces effecting steel industry, Indian steel industry showed remarkable resilience. As shown in Chart 1, the steel industry's top titans demonstrated remarkable resilience during the pandemic wherein they managed to increase revenues while reducing expenditures.
In 2019-20, Tata Steel achieved a 7% increase in revenue while cutting expenses by 4% in 2020-21. In comparison to the previous year, JSW increased revenue by 8% while cutting expenses by 2%. Jindal Steel achieved an enormous increase in revenue by 23% as well as managed to cut the expenses by 3% in 2020-21 when compared with 2019-20. According to financial data from the last two years, SAIL increased its revenues by 11% but its expenditure also increased by 7%.
Revenue growth under pandemic: Government of India policies like the Atmanirbhar Bharat programme, the Production Linked Incentive scheme helped the consumers of steel products to grow, like automobile and auto components, consumer durables, solar equipment, telecom, etc. Coupled with the policy initiatives, GoI has announced an investment of over one trillion in infrastructure over the next five years. In 2021, India’s steel demand grew by 20% over 2020, totaling 103 MnT more than the pre-pandemic level.
Digital strategies: Digitalisation of the steel industry are connected with the volatility of the market, intensification of the competition of the global market, shortened life cycles and innovations as well as an increase of the complexity of products. Industry 4.0 created a ‘new world’ development concept based on strong interactions of automation, processing, and data exchange in smart factories. Industry 4.0 is the strong cooperation of operational technology (OT) and information technology (IT) in production.
Major Indian steel manufactures like TATA, SAIL, JSW, Hindalco and NMDC were used digital diffusion projects covered a range of Industry 4.0 technologies such as IoT, Artificial Intelligence, Machine Learning, and Virtual Modelling & Simulations. This intervention aimed to optimise costs, integrate sites, add more products, increase customer satisfaction, and implement safety standards with zero incidents. Core support functions like HR and finance, IT, logistics operations and mining activities were digitised for the entire value chain from mineral exploration to mining, ore processing, and the sales and distribution of the product.
Technological developments, especially in the sphere of telecommunications, which have created “Big Data”, “IoT”, “Cloud Solutions”, and Block chain will create steel industries in the economic, social, and environmental fields are part of the concept of sustainable industries and economies.
(Dr Prashant Salwan is a professor of Strategy at IIM Indore; Dr Srinivasan. R Iyengar is a Director at JBIMS, University of Mumbai)
