Digitisation, emissions reduction and networking: the future of steel trading in transition

Companies face the challenge of reducing their CO₂ emissions while finding innovative ways to optimise their processes. In this report, we present the latest developments and solutions that are shaping the future of steel trading. From digital platforms that are transforming steel trading to decarbonisation strategies across the metals supply chain, the nexus of technology, emissions reduction and cross-industry connectivity is driving steel trading towards a more sustainable and efficient future.

Decarbonisation along the metal supply chain through transparency and efficiency

Dr Niklas Friederichsen, Chief Product Officer of Metalshub GmbH, explains in the trade journal stahl., CO₂ emissions must be traceable along the metal supply chain and reduced first where this increases costs the least. In the steel trade, far more than 95 % of emissions are attributable to the CO₂ backpack of the products distributed, which means that purchasing is of central importance.

Metalshub helps its customers from the purchase and sale of metallic raw materials to link CO₂ emissions to transactions and to take them into account in commercial decisions. This trend will also gain importance in steel trading in the future. With some exceptions, decarbonisation will increase costs. However, the level of these additional costs may be fundamentally different in different places because of different underlying mechanisms.

To effectively reduce overall emissions, both Scope 1, 2 but also Scope 3 emissions need to be considered. Depending on the manufacturing route and alloy content in the steel, Scope 3 emissions account for between 15% and 70% of total emissions. For all downstream companies in the value chain, such as the steel trade, Scope 3 emissions are therefore the overwhelming driver of total emissions.

Consideration of Scope 3 emissions for effective emission reduction

Friederichsen describes that Scope 3 emissions are in part easier and cheaper to save. In his view, this is primarily due to the following two points: the lack of visibility of emissions along supply chains and the lack of a regulatory framework to take CO₂ backpacks (emissions certificates) into account. One conditions the other. As long as a large proportion of companies do not have sufficient visibility of "purchased" CO₂ emissions, policymakers will find it difficult to set incentives and guard rails here.

From the perspective of cost-efficient climate protection, the tonne of CO₂ that causes the least additional costs should always be saved first. In many cases, this can be a CO₂ saving in purchasing at steel plants, since CO₂ avoidance in the reduction of iron ore to iron is currently only possible by substituting coking coal with hydrogen. However, this is currently very expensive and its use requires the costly conversion of existing units.

However, it may be the more effective and faster route to significant savings in certain areas until the stage is set for full decarbonisation of the entire supply chain. Metalshub's contribution is to provide an infrastructure that enables buyers and sellers of raw materials to collect their Scope 3 emissions across sites.

Digitalisation as the key to sustainability in the European steel industry

On Metalshub, transactions are mapped digitally with all their details. As a result, CO₂ backpacks can be calculated very precisely on the basis of benchmarks in the first step. Sellers have the option of linking their actual emissions to a transaction and making them visible to their business partner. This makes the issue of CO₂ visible at the point of sale where the buyer makes his or her purchase decision. Metalshub thus contributes to the fact that ESG aspects can increasingly be taken into account in purchasing decisions and CO₂ emissions can thus be reduced.

The Corona pandemic exposed the vulnerabilities of global supply chains. The complex supply chain of the steel industry in particular was affected by strong fluctuations in demand, insufficient forecasting capacity and supply bottlenecks. According to Vanilla Steel, this has led to a rethink in the industry, so that many companies have now opened up to digital processes. One indicator of the progress of digitalisation in the European steel industry is the total cost of data storage. These are many times higher today than they were a few years ago.

Nevertheless, it is important to catch up with other regions (e.g. Asia) in terms of digitalisation in order to be able to keep up with global competition in the future. The networking of the downstream supply chain is particularly interesting in this context. Because, in contrast to production, the steel trade has so far remained largely untouched by digitalisation and therefore offers particularly high potential.

Platform for the European steel trade

Following the successful launch of the e-auction platform for surplus steel products, Vanilla Steel's goal is to secure the competitiveness of the European steel industry through geographical expansion and the development of further products: Currently, the company works with more than 150 suppliers and 1,000 buyers from more than 60 different countries.

In addition to its original positioning in flat carbon steel, Vanilla Steel now also trades long steel products as well as stainless steel and aluminium. The main focus of the steel trading platform is on materials that are in excess inventory (stockpiles, over-rolled and declassified products) and are not linked to any customer order.

With its high customer reach, Vanilla Steel helps to qualify those buyers who have the highest possible re-use purpose for these products. This maximises selling prices and saves time in buying and selling through automated processes.

Digitalisation and decarbonisation - an inseparable link for the steel industry

If you follow the current discourse in the steel industry, digitalisation and decarbonisation are probably the most frequently mentioned terms. Nevertheless, it is noticeable that both trends are too often discussed separately from each other. According to Vanilla Steel, digitalisation forms the basis for a successful reduction of CO₂ emissions. The importance of digital platforms in particular is still underestimated with regard to achieving the industry's climate targets. This is because, in contrast to the efficiency improvements in production over the last few years, the downstream supply chain is not yet as efficient as it used to be.

The lack of end-customer data leads to overproduction, high stock levels, unnecessary material movements and thus high CO₂ emissions. By connecting market participants across the entire value chain, platforms such as Vanilla Steel improve communication processes and forecasting options, leading to lower CO₂ emissions.

Here Vanilla Steel presents its platform in more detail: https://www.youtube.com/watch?v=ophAbHaqxro

Finally, full transparency of the CO₂ footprint, including all Scope 3 emissions, is fundamental for the end buyer to make purchasing decisions. In the future, digital platforms will make it possible to collect this data from the purchase of materials, through production, to final consumption. The sale of surplus steel via the platform extends the life cycle of already produced material, reduces the scrapping rate of the suppliers and thus improves their CO₂ footprint.

Networking and synergy driving the future of the steel industry

The networking of companies, technologies, processes and services will also determine the steel business in the future. Stahlo focuses on the topics of steel service, coil trading, digital marketplace, prefabrication and contract partnership. "Only through networking and synergies can answers be found today to the increasing demands and growing complexity in the steel business," says Oliver Sonst, Managing Director of Stahlo service.

How customers find the right steel for their individual application is explained by the Stahlo application consultancy. They accompany companies in all phases of their project and advise on all steel topics: such as production, energy use, emissions, material selection, processing and supply models with packaging and logistics. The company networks steel demand with worldwide resources. Synergy effects in global sourcing mean competitive advantages for customers. With its services, Stahlo ensures financing, international trimodal logistics, import processing and quality inspections.

Stahlo is breaking new ground in steel trading through new partnerships with two start-ups, Vanilla Steel and Resourex. The companies offer different online platforms with intelligent and smart configuration options for flat steel that meet all requirements. There, users can search for availabilities, grades, material properties and, in the future, steel classifications, and inquire and bid directly online.

Overall, the combination of digitalisation, emissions reduction and networking opens up new opportunities for companies to act more sustainably and efficiently. From transparent tracking of CO₂ emissions to the use of innovative digital platforms for steel trading, the industry has already taken steps towards more resource-efficient production. The coming years promise an exciting journey full of opportunities and challenges, where the steel industry can further expand its role as a driver for responsible progress.

Source:

Trade journal stahl. No. 5-6 | 2021