Traditionally, the industry has been more focused on continuous improvement than on innovation, Narendran said, having pushed for efficiency improvements and incremental performance enhancement year-on-year.
He cited production-led innovation drives in Europe in response to “very demanding customers there who are pushing us to innovate more and more.”
“Innovation is possible in the process, in the product, in the way we approach customers, in the way we generate orders, and in the way we fulfil orders,” he said. “I don’t think we’ve even scratched the surface on innovation as an industry.”
Part of this industry innovation would be to look at how capital can be used in a more efficient way “than building everything,” and also tackling overcapacity.
“There’s lots for us to learn from other industries and how they have become more capital-efficient,” he said, citing the airline industry and its “fantastic job” of sharing infrastructure.
“There are a lot of inefficiencies in the system which can be ironed out, if we work together to share infrastructure,” he said. “It could be ports, captive ports, railway lines, many other areas. Why can’t the steel industry work on a lease model like the hotel industry?”
Approaching capacity as a “sensitive, difficult subject” with views that vary depending on what on region you are in, Narendran referred to concern about capacity added in China in 2015, and the capacity that is still available there.
But he added that “between 2015 and today, China has exported less and less. In 2015, China was exporting 10 million tonnes per month; this year, for the past few months, it has been a net importer – [that is] a big shift.”
Referencing new capacity being added in India, equipped with the latest technologies which are carbon-efficient and cost-efficient, Narendran said that new capacity will continue to be added in markets where demand is growing. This meant that countries such as India, which have raw materials, have the markets that offer a natural place to add capacity.
Consolidation is critical for overall efficiency in the industry, which is still fragmented, according to Narendran, although the industry has also grown in recent years. In the past three decades, he added, there has been consolidation through organic growth, and shifting ownership from governments to the private sector, which he said drove better capital efficiency.
“Overall, our industry needs to do a lot more work to become structurally sustainable. New sectors are emerging to cater to the infrastructure needs of a changing economy. [Areas such as] electric mobility infrastructure, e-commerce related infrastructure such as warehousing, [and] renewable energy… will see rapid growth. The steel industry needs to innovate quickly to remain the material of choice for these new-age sectors,” he said.
Another big challenge for the industry was reducing carbon emissions “at a time when consumption and production of steel is expected to grow… because other industries and sectors are reinventing [and] re-calibrating themselves. The steel sector needs to do a lot more,” he said.
Emissions from the steel industry must fall by 50% by 2050 to meet climate goals, posing a huge challenge for the industry, which Narendran said would require a revolution, and innovation with the use of enabling infrastructure.
“There are a number of steps we need to take [in] material efficiency [and] performance enhancement,” he said, “and also active participation in developing breakthrough technologies such as hydrogen, carbon capture and storage, and developing alternatives to blast furnace technology.”
Tata Steel is exploring the feasibility of Carbon Capture Utilization and Storage (CCUS) to capture CO2 from the company’s steelmaking operations
, and either to reuse it or store it in empty gas fields under the North Sea.
Another study will explore a water electrolysis facility to produce hydrogen and oxygen at Tata Steel’s IJmuiden steelworks in the Netherlands.
These are in addition to Tata Steel’s own HIsarna process, developed in Europe, which is more carbon-efficient than a traditional blast furnace, with opportunities to contain the carbon for use or storage.
The investment around the relining, refreshing and average life of a blast furnace, which is about 14 years, should be looked at again through the lens of excess capacity, Narendran said. This was often over-simplified by looking at which other regions have excess capacity, and asking why other regions are building new capacity, he added.
“The answers or solutions are more nuanced than just doing the math of where is the excess capacity and where is new capacity being built,” he said.
“Going forward, we will not only need to look at demand and supply, we will need to look at economics, the cost of producing steel in different geographies, the carbon footprint of steel production in different geographies… which are also changing due to the regulatory environment and local conditions,” he said.
The opportunity for the steel industry to innovate starts with raw materials, he said, and making better use of them to reduce the carbon footprint through being more careful about the choice of materials, making more energy-efficient use of raw materials, and developing alternatives to blast furnaces that have a smaller carbon footprint, in addition to using more steel scrap in the production of steel to help reduce that carbon footprint.
Narendran also noted other industries that the steel sector will need to collaborate with, such as the oil industry for carbon storage, chemical industries for usage, producers of gas which do innovative work on hydrogen, and existing mining companies to work on carbon capture and storage, because not all coal use can be replaced by hydrogen processes.
Finding a way for the steel industry to participate in the creation of a hydrogen economy, he said, and to make hydrogen cheap and plentiful, will also need to be tackled.
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