„Our ambition is to be a carbon-neutral steelmaker"
by Dagmar Dieterle
Dr. Henrik Adam, Chief Commercial Officer at bei Tata Steel Europe, talks in our interview about transformation processes in the steel industry, sustainability and his visions for the future.
The role of the steel industry is constantly changing. New products are being created and requirements for existing products are changing as well. What do these changes mean for Tata Steel and how do you deal with these changes?
I believe that today we would no longer be part of the market, if we did not learn to adapt to changing conditions. After all, our main production sites are already over 100 years old. And even during the last 10 years we have seen transformation processes, where we had to adapt to the market again and again. When I think about how our site in Port Talbot was set up a decade ago compared to how it is set up today, you can really see how much energy we have put into optimizing processes. Of course, this adaption process has very different facets. How do we deal with raw materials? How do we make our production even cleaner? How do we design our working environment to be safe? And how do we manage to respond to the changing needs of our customers?
I think that especially the sustainable use of resources will be a key topic in the upcoming decades. And when we speak about resources that means raw materials as well as employee loyalty and environmental awareness. I am sure there will be challenges, which we do not even foresee today and for which we have no solutions yet.
That brings us to the next question. Customers are increasingly concerned about sustainability. Sometimes sustainability is even the gateway to new projects. What does that mean for Tata Steel?
Actually, we have four distinct groups of customers: automotive, engineering, construction and packaging. In all these industries our major customers require very close cooperation on sustainability issues. But we do not only face these requirements out of necessity, but also because we are convinced that sustainability will be a key issue to all our activities. Thereby the needs of our customers may seem very diverse at first glance. However, we see quite similar approaches, when customers start to identify their strategy on sustainability it starts with the following questions: What are the main topics that I have to address? How can I make these topics transparent across the entire supply chain and really assess and evaluate my activities? How can I monitor individual processes within the supply chain? And how can I present and report all processes involved transparently?
The sustainability requirements are always more or less in line with this scheme, even if individual requirements are customer-specific. Therefore, I prefer that we can make progress and develop in the same way. If we can make our sustainability within the supply chain transparent then our customers will be confident they can assure consumers of that too. But this is happening now and it will take time, after all, the investments that have to be made, the processes and practices have to be put in place and our customers have to test them.
Let alone the lead time for new investments, which is currently about two to three years. So, sustainability issues need to be looked at long-term; without a given standard but certainly having a certain pattern in mind. Gradually we need to find a way to analyze, track, audit and report new processes. At Tata Steel we are already exactly on this path; not because our customers demand us to be there.
You mention the importance of monitoring your supply chain. Actually, there are a variety of risks in the supply chain, when it comes to the violation of environmental and human rights. How do you identify these risks? And how can you take action as Tata Steel?
We observe our supply chains carefully and particularly take a look to those areas that involve potential critical issues. Following this procedure, you sometimes realize that there is no critical issue anymore because the problem has already been solved or because there are mechanisms that help to avoid the problem in advance. In other cases we try to identify solutions to problems that still may exist. For example, we collaborate with institutions, or we create standards ourselves and create measures to monitor these standards. Of course, such standards have to be checked on a regular basis. Only by consistent monitoring, we can make sure everything goes the way it should go.
For example, together with one of our customers we collaborate on the subject of tin, as there has been a common understanding in dealing with three important supplier chains. In a joined action with our two closest partners in this area, can makers and fillers, we asked ourselves: Where does our tin come from? Actually, most of the tin comes from Congo, a potential area of conflict. With the label "Conflict Free", we have therefore developed a solution that specifically addresses the problem and ensures that our tin is acquired from conflict-free areas only. Similar procedures exist for other raw materials, such as zinc or lithium, where we also have to monitor our supply chains and regions of origin very carefully.
There are also opportunities via recognized accreditation programmes such as BES 6001 – an independent responsible sourcing certification which accounts for both our supply chains and operations, from raw materials to final steel product. Our entire UK steel construction portfolio is certified to the exceptional standards that BES 6001 entails and remains the most comprehensive portfolio of responsibly sourced products from one steel company globally, exemplifying its innovative nature.
This portfolio of products, which includes products such as pre-finished steel, structural hollow sections, and insulated panels, sells around the globe. We are currently expanding this leading certification to our mainland European sites as well.
Your office is in the Netherlands. In concrete terms: How do you react from the Netherlands to protect the environment and address people´s rights? Do you cooperate with institutions and governments?
For example, we are among the big local employers with our IJmuiden site. This means that we are an important column of the regional economy and it is rather us setting standards. This means that we see a huge responsibility ourselves, which we also live with. We have to ask ourselves: How can we, as a production site in the Netherlands, or the UK, live up to our own high standards? Here, we rather speak about global cooperation, and not so much about local solutions.
But, of course, other topics can also be addressed locally. In the Netherlands, for example, we have a local agreement with the metalworking industry, with zinc producers and with copper alloy suppliers. However, we are also working with employee representatives and NGOs to find a code of conduct that will allow us to be particularly active on issues that can be locally solved. We try and do this at all our sites, not just to comply, but to go further and lead.
We live such cooperation in many fields. Our business is a combination of global issues and very regional challenges. So it is important to communicate well along these two dimensions "global" and "regional".
Also, there may be local issues that, in our opinion, are more likely to be solved on a global level. A very profane example are working gloves. They are a huge topic for all companies. There is no need to set up a working group for a single site, but you can rely on knowledge from the global corporation. Similarly, we address much more complex issues, when it comes to communicate local things globally.
Let us talk about another topic. Donald Trump is currently introducing all sorts of tariffs. Tata Steel Europe also exports a large volume of goods to the US. To what extent are you affected by the new US tariffs? Or is your US business still based on old supply contracts?
Unfortunately the US Administration has chosen to proceed with implementing the Section 232 Tariff on national security grounds for our supplies from both the Netherlands and the UK. We are in favour of free and fair trade. We believe the key to solving disputes is through negotiation. We are therefore continuing to call on the European Commission to maintain dialogue with the US to get this decision reversed or gain exemptions for our customers.
In addition, the US producers cannot produce all steel products themselves.
Yes, that is another point. If our customers could locally buy what they need locally, then we would not have had our customers in the US for such a long period of time. We have customers in the US that have supply relationships with us for more than 50 years. Obviously: If there was an equivalent local producer, those customers would not have stayed with us for so long. And that's why we support our customers in getting exceptions. There is a certain backlog of exceptions, and we are glad that we were able to obtain exceptions at least for certain of our products. However, generally it is the market that regulates the prices.
And how do you see the future price development in Europe?
We are very dependent on the prices of raw materials. For me, there is currently no indication that commodity costs will start to relax in the near future, but rather I tend to see a possibility for prices to potentially further rise. Still, at the moment we do not have any reliable forecasts that allow us to foresee the prices for our customers. But I think that we could be glad at the moment if prices stayed at the current level.
Regardless, of current price developments and Donald Trump, what do you wish for 2019?
Personally, but also speaking for our industry, I wish that we are setting the right course to be able to produce steel in Europe by 2050. But more than that – we are already one of the world’s most CO2-efficient steel companies, we want to go further. Our ambition is to be a carbon-neutral steelmaker. Our goal is to reduce our CO2 emissions by 80% before 2050, on our ultimate journey to be a carbon neutral steelmaker.
This is not going to be an easy journey and our vision is to continue developing breakthrough technologies which power our future. We will develop and nurture innovations which have the potential to change the way steel is produced.
I think we have a special responsibility as executives to make sure that future generations still we be able to safely work in Europe. For me, economic success is connected with production performance. In my opinion, and also with increasing age, this is the driver that pushes me forward the most, and comes even before short-term price negotiations or the development of new products. I admit, that's a pretty abstract goal. In concrete terms, however, it means: I am interested in the topic of sustainability, the issue of fairness, and last but not least, the topic of intergenerational cooperation, from which I also benefited during my career.