Learning resilience and nuances of digitalization from Indian steel producers
COVID-19 has impacted the global economy, human feelings, and all related activities. Due to the lockdown and reverse migration of workers, the construction and automotive sectors have suffered the most. Eight percent of steel consumption is for construction and the automobile has collapsed.
During the third industrial revolution, information technology (IT) began to explode and analog technology was transformed into digital. Computers, microprocessors, mobile phones and the Internet have transformed traditional production and laid the foundations for future digitization. In recent years, the digitalization of production has become increasingly intelligent. With the popularization of the concept of Industry 4.0.
Global steel demand contracted by -13.3% over the year. The surprising China rose 8%. Indian and global GDP contracted significantly. 30% of the world’s steelmaking capacity was unused. In India, steel consumption fell by 13.7%, recording 88.5 MnT in 2020 compared to 102.6 MnT in 2019.
Even with so many negative forces affecting the steel industry, the Indian steel industry has shown remarkable resilience. As shown in Chart 1, the major titans of the steel industry have shown remarkable resilience during the pandemic by managing to increase their revenues while reducing their expenses.
In 2019-20, Tata Steel achieved a 7% increase in revenue while reducing expenses by 4% in 2020-21. Compared to the previous year, JSW increased its revenues by 8% while reducing its expenses by 2%. Jindal Steel achieved a huge revenue increase of 23% and managed to reduce expenses by 3% in 2020-21 compared to 2019-20. According to financial data for the last two years, SAIL has increased its revenues by 11% but its expenses have also increased by 7%.
Revenue growth during the pandemic: Indian government policies like Atmanirbhar Bharat Scheme, Production Linked Incentive Scheme have helped consumers of steel products such as Automotive and Automotive Components, Consumer Durables, Solar Equipment, Telecommunications , etc Coupled with policy initiatives, the Indian government has announced an investment of more than one trillion in infrastructure over the next five years. In 2021, India’s steel demand increased by 20% compared to 2020, totaling 103 MnT above the pre-pandemic level.
Digital strategies: The digitization of the steel industry is linked to market volatility, increased competition in the global market, shortened life cycles and innovations as well as an increase in product complexity. Industry 4.0 has created a “new world” development concept based on strong automation, processing and data exchange interactions in smart factories. Industry 4.0 is the close cooperation of operational technology (OT) and information technology (IT) in production.
Leading Indian steelmakers such as TATA, SAIL, JSW, Hindalco and NMDC have been used in digital broadcasting projects covering a range of Industry 4.0 technologies such as IoT, artificial intelligence, machine learning and virtual modeling and simulations. This intervention aimed to optimize costs, integrate sites, add more products, increase customer satisfaction and implement safety standards with zero incidents. Critical support functions such as human resources and finance, IT, logistics operations and mining activities have been digitized for the entire value chain, from mineral exploration to mining, to the processing of the ore, as well as the sale and distribution of the product.
Technological developments, particularly in the field 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 development. industries and economies.
(Dr. Prashant Salwan is Professor of Strategy at IIM Indore; Dr. Srinivasan. R Iyengar is Director at JBIMS, University of Mumbai)
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Published on: Saturday, February 19, 2022, 07:00 IST