Posted on 23 Nov 2006
First Asian Steel Manufacturing Conference
The 1st conference was held at
the Shanghai International Convention Centre, Shanghai from Nov 2 to 3. The conference was organized by the IBG
Group, a professional conference organizer, with support principally from
Deloitte’s and several other companies.
The conference attracted about 60
delegates, mainly from China
of course, with participants from India,
the USA,
and other Asian countries. 13 of the 14
papers published in the original program were presented, but only one of the 3
panel sessions was held as there were insufficient panelists for the second
day.
There were three main themes discussed at
the conference:
1) China.
- China expected to grow at the same rate for the next 5 years and
will continue to grow over the next 20 years
- Urbanisation has fuelled the construction industry and hence
the long product sector, hence great demand on long products
- More than 50% of production and consumption is in the long
products sector. Chinese steel
industry finds it difficult to break into the higher quality grades such
as that required for machinery, equipment and electrical
applications. MNC’s building plants
in China
usually import these machines for their factories (65-75% imported).
- Because demand is high, there is less incentive to improve
quality. Although there are
exceptions, quality generally is still an issue for the Chinese steel
industry
- Restructuring in the Chinese steel industry is very slow,
mainly because provincial and local governments still cannot decide how to
apportion revenue and tax with mergers of plants owned by different
provinces/local governments.
Moreover, they are concerned about possible strikes if there is a
large scale lay off of workers
- Any merger tends to be in name only as there is no evidence of
rationalization and consolidation of finance and other functions
- But there has been some success stories, such as Tanggang which
was from the merger of 3 companies to produce about 16 millions tones in
2005, second only to Baosteel in China
- China exported about 45mt last year (direct export) plus another
30-35 indirect export
- Chinese steel companies are still not fully market driven, but
rather driven by the central committee, i.e. profit not the only
objective, employment is a key one
- Closing down of small capacity facilities postponed because of
economic impact
- Above factors make restructuring to increase flat products
difficult
- Export also becoming more difficult for all, not just the steel
industries, because the advantage of low labour costs now is negated by
the threat of antidumping in many countries
2)
The issue of projected growth
in capacity, related topics on consolidation, merger and acquisition, and, both
worldwide and also in China.
- Demand projected to reach 1.2 billion tones by 2010
- Concerns were expressed on the continuing announcement of
capacity increases. The total
volume announced is in the order of 600 million tones by 2013 (green and
brown fields).
- Consolidation is necessary to avoid overcapacity
- High profit in recent years means companies are looking at
increasing value creation – capacity increase with either new facilities
or acquiring existing facilities
- Price of raw materials will have to come down as they now far
exceed the full cost of new expansions (Arcelor-Mittal)
- Consolidation of the Chinese steel industry has not happened at
the pace planned by the central government.
- M&A world wide will continue and companies need to be
extremely careful before going into such ventures as more than 70% of
M&As ( all industries) are deemed failures
3)
Performance improvements
necessary to ahead of competition
- Tata Ryerson presented a paper on their benchmarking exercise
which has led to improvements by orders of magnitude. Benchmarking was seen as the way to go
if organizations wish to achieve quantum leaps in performance rather than
continuous improvements
|
With benchmarking
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Without benchmarking
|
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Internally focused
Changes are evolutionary
Few alternatives
Average of industry
Based on history and gut feel
Reactive
Route of least response
We are ok
|
Understanding of competition
New ideas of proven practices &
technologies
Many options
Business practice breakthroughs
Based on reality
Proactive
Based on best industry practice
Sense of urgenc
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- Tata Metalliks presented a paper on Operating Excellence, the
key message here, as is with the other Tata paper, is that management must
lead from the front in implementing these programs. Otherwise improvements will not be
happen, and even if it did happen will not be sustained.
“If leaders are committed, they will be actively involved, if they
are only interested, they will bring in consultants”
- There was a paper on the 6 sigma program and the same speaker
presented a session on lean manufacturing,
These programs, together with others such as 5S, TPM, etc., are all
similar and can lead to significant improvements in performance.
