BOOM potential for Polish steel - prediction
series: Article of the month on PICC site
source: www.prnewswire.co.uk
"The Polish steel industry has a prosperous and successful future in front of it if it can rise to challenges and opportunities posed by the continuing restructuring of the central European markets". This was the view of worldwide steel industry specialist Dr Rod Beddows, of the London-based international strategy consultants Beddows & Company which has a dedicated steel industry practice. He was speaking at a Polish national steel industry conference in Southern Poland, held to commemorate the 200th anniversary in November of the construction at Huta Baildon of the first coke-fired blast furnace in Europe.
He went on to point out an additional opportunity presented by further integration within the European Union. He anticipated the European steel market generally growing at approximately 1% per year, but in the case of Poland he expected much more substantial growth of 3 - 3 1/2% a year.
But with the forecast potential he also brought a stern warning. Poland like its European and world competitors would have to build a new kind of steel industry - fast.
He pointed out that today the Czech and Slovak industries are moving faster than Poland towards restructuring, reinvestment and privatisation. The Polish steel industry now has the choice of becoming the core of the European steel industry or of being marginalised by low cost producers in the East of higher quality producers in the South. That choice, said Dr Beddows, lies largely in the hands of the managers and executives now managing the industry.
The drivers of the new kind of steel company would be the international capital markets, hungry for adequate return on assets, the developing national and international consumer markets demanding high quality products and service, and the many rapidly developing technologies.
The strong overall growth expected in the Polish market will be particularly focused upon the most demanding quality sectors, such as domestic goods and automotive and packaging steels. Current evidence suggests that Poland could well be one of the principal manufacturing platforms for automotive production in Europe into the next century.
One reason is Western and Asian inward investment into those countries of Central Europe which offer low labour costs in comparison to neighbouring Western Europe, a significant advantage to labour intensive industries such as engineering. Another is that the populations themselves represent an attractive and untapped potential market. There is already a continuing flow of labour intensive/value added manufacturing and processing businesses into the area, notably from Germany.
But it will be a major challenge to the Polish steel industry to provide the new capabilities of quality production and customer service this changing structure of market demand requires. Serving international customers will require new skills very difficult to learn alone, and so international 'quality partners' can be expected to play a role and to assist Polish steel companies to develop.
Western Europe took twenty five years tor more to implement most of its restructuring. If Poland can learn from this it can move much faster. For the successful Polish steel companies there is every prospect that, given the right access to expertise, experience and capital, they could leapfrog into service-oriented businesses much sooner.
Technical developments within the Polish industry are dependent upon the speed with which it restructures. For a product like cold rolled steel coil the best standard for labour content in Western Europe is 24 % and the worst is 35 %. In Poland it is probably 10% and in the Ukraine 6%.
The numbers of people employed in the 'core businesses ' alone of individual Polish steelworks can be more than four times 'Western best practices.' But with significant changes taking place over the next ten years in Western Europe, process technology improvements should reduce the West European average labour content from 30% to 20%. In Poland improvements should reduce it to 8% and it will probably remain 6% in the Ukraine.
For a 10m tonne industry in the year 2006 target employment could be 20,000, although in the process some 5,000 - 10,000 people may have shifted from direct employment to sub-contractor status. This would certainly bring Poland towards the good current Western average of 115 tonnes per employee per year. At 20,000 employees, said Dr Beddows, it would soar to 500.
Where is restructuring money to come from? Pressures upon state budgets mean that steel is becoming dependent upon international capital markets for its funding. It is therefore almost inevitable that many Polish steelmaking assets will be part of larger European groupings by the year 2006 for the sake of economies of scale, customer service, product specialisation, and access to marketing and distribution networks.
One thing is certain, concluded Dr Beddows. Customers, whatever their focus, will demand ever increasing value - quality/cost tradeoffs with 100% delivery performance and shorter cycle times. That means a new kind of steel industry.
The key to releasing Polish steel's full potential will be the speed with which the industry and its owners, advisers and controllers tackle the tough job of restructuring it - ahead of customer demand.
Further information (full speech available): Dr Andrzej Kotas, Director, East European Steel Practice
Distributed by PR Newswire on behalf of East European Steel Practice
