Ensuring Future Market Access for Stainless Steel
by Ivor Kirman, President, Nickel Development Institute
Presented to British Stainless Steel Association Conference "Stainless Solution for a Sustainable Future,"
Rotherham, England, April 3, 2003.
In the past three years, I have spoken at a few other stainless steel conferences. I have usually been the lone voice talking about Sustainable Development and its associated opportunities and challenges. I have had a very mixed reception - polite, but often puzzled and sometimes irritated.
Puzzled because I was talking about issues that had not yet appeared clearly on the radar screens of the usual people who attend stainless steel conferences. These were mostly sales people, traders, stockists, fabricators and market analysts. I have a high regard for all these colleagues � especially for their ability to collect, use and forecast market information. Why were their usually effective radar screens not registering Sustainable Development? Probably because the drivers behind these developments are socio-political � not technological or economic.
Moreover, these socio-political developments were outside the personal experiences of most of the attendees. This is not surprising. After all if you wanted to put your finger on the pulse of socio-political change, you would not normally ask a metallurgist in his fifties. That is not to be critical of metallurgists in their fifties. It would be equally unusual to ask a political PR consultancy for advice on future trends in the stainless steel industry. Most of us have to learn how to read and anticipate political changes. And this is hard work, especially as many of us have little sympathy with the political means by which these changes are taking place.
Another reason why my audiences were puzzled was that they were not hearing these messages through their normal communication routes - through the supply chain, from their customers. Even today, it is highly unusual for Sustainable Development messages to be communicated back through the supply chain - from buyer to seller. This is particularly true when parts of the supply chain are fragmented and involves many smaller companies, as is the case for most metal chains, including stainless steel. There are some high profile exceptions - for example BP, Ford, Philips. But even with these companies, the messages always seem to be heavily image- or PR- oriented and to be far from the day-to-day supply chain dialogue about orders, contract performance and cost reduction.
It seems that on Sustainable Development, we will not prepare for the future just by listening better to our customers. Rather we have to think things through for ourselves and then persuade our customers to join us when they are ready.
I said that there was also some irritation to my raising the issues of Sustainable Development and Stainless Steel. Especially to me raising the challenges and threats that SD might bring.
- It was fine to talk about opportunities, but must I talk about threats? After all use of stainless steel is growing fast. It is taking more and more markets every year. It is an excellent material. People love it. Why should this be under threat?
- And why keep on talking about scrap and recycling? The producing industry knows all about scrap - we use it and trade it all the time. But why confuse our customers by telling them that that nice shiny stainless steel that they are thinking of buying is made using scrap? They will think that scrap means second quality and ask for a discount.
- And do you have to keep on telling people that stainless steel contains nickel?
But from the programme for this conference, I realise that things have changed. Sustainable development is now clearly on the radar screen of at least part of the stainless steel industry. I commend the organisers of this conference for their judgement. I commend the industry for the maturity that it is now showing in being prepared to discuss these issues openly and in a forward looking way.
Maturity and Over �simplification
Maturity is a key word. We need our regulators to have the maturity to take the right decisions and not just those that are temporarily popular or politically expedient.
The other key word is over-simplification. The issues raised by Sustainable Development are complex and need to be considered as such. Over-simplification can lead to the wrong decisions being taken for the right reasons. It can lead to markets and products being sacrificed to bureaucratic convenience or to the law of unintended consequences.
We need all our stakeholders � regulators and the political forces of "civil society" to whose pressures the Regulators respond - to have the maturity to avoid the short-term temptations of over-simplification.
But industry also needs to show maturity. And, especially in our internal discussions, we need to avoid our own over-simplifications.
I believe that the days are now past when senior managers thought that all we had to do to meet the political challenge was to run an advertising campaign ("shout louder about the good things"), to urge regulators to use more common sense ("tell them to stop being silly"), to have a heavy-armed political lobby ("tell them that factories will close") or to reach for lawyers ("threaten to sue them"). None of these offers a solution to our challenges. All of these should be part of our thinking - we need excellent communication, strong political advocacy and legal advice. But we need a lot more as well.
I suggest that another seductive over-simplification is the view that stainless steel should be assessed as being totally separate and distinct from its constituent elements. Again, some aspects of this argument should form part of our strategy, but we should not mislead ourselves that stainless steel can win its freedom on this argument alone. The relationship between elements and alloy are more complex than that. And this complexity is well known by some of our stakeholders. If we over-simplify, we will not be persuasive.
The "holistic" approach to ensuring market access
To ensure future market access for stainless steels, we need a multi-level "holistic" approach that not only promotes the strengths of stainless steel but also addresses the actual or perceived issues.
The starting point is excellent. In many,many ways, stainless steel is an excellent material for the future, much better positioned than most of its competitors. It combines almost all the properties that will be needed if we are to move towards a more sustainable society.
- Long useful life
- Hygienic
- Attractive
- Corrosion resistant
- Tough
- Affordable
- Recyclable
- Safe, when used appropriately
Stainless steel may not be "renewable". But, because of its long life and recyclability, it is as good as, or almost as good as, "renewable".
This catalogue of strengths is very impressive, and should give us a lot of confidence in the future of our markets. But there are sustainability issues that stainless steel needs to address.
The production of stainless steel:
- requires energy and some non-renewable raw materials
Industry must demonstrate that it uses these resources efficiently and should commit to continuous improvement in this resource efficiency.
- uses raw materials that can have certain hazardous properties
Industry must demonstrate that it uses these products in a way that is reasonably safe for workers, local communities and for the environment
- generates waste
Industry must demonstrate that it disposes of this waste with realistic safety and should commit to continuous reduction of waste
- generates emissions
Industry must demonstrate that it controls emissions to a level which is reasonably safe to the local community and to the environment, and should commit to continuous reduction of emissions
- involves extensive global trade
Industry must make the case (socio-economic and environmental) for this trade.
And no matter how good the product, there will always be some issues related to appropriate use and reasonable safety. Stainless steel is no exception. It needs to exercise product stewardship. The industry must demonstrate that it takes effective action to:
- encourage the use of appropriate grades for particular applications
- encourage the use of appropriate fabrication practices
- encourage the use of appropriate cleaning and maintenance practices
- discourage those few uses, which are truly inappropriate.
Note the important words:
"Industry must demonstrate" : not just do but demonstrate that we do
"commit to continuous improvement" : SD is not a single one off target.
"takes effective action" : not impressive words but impressive deeds
If the stainless steel industry is doing all this, or at least is preparing to do all this, then it has earned the right to press regulators and other stakeholders to play their part with responsibility and maturity. And allow stainless steel to play its rightful role in the future of society.
What do we actually want our regulators and politicians to do?
(a) Prefer proportionate over absolute
First and foremost we need them to adopt an approach to safety that is proportionate not absolute. Earlier I used the expression "reasonable risk" - meaning a level of risk that is perceived by society (i.e. by the political process) as "reasonable", taking into account all that we know about risks and benefits. Picking the right adjective is not easy - "reasonable", "proportionate", "realistic", "politically acceptable" - all mean essentially the same thing. What we cannot accept is the absolute concept of "no risk" or "zero risk".
Recently I have seen several regulatory drafts that use the expression "insignificant risk". This sounds softer and therefore appears to be more politically digestible. But "insignificance" is a mathematical concept and in the hands of a regulator, I fear that "insignificant risk" is essentially the same thing as "zero risk".
But we need to recognise that parts of the current political structure here in Europe are actively promoting policies based on absolutes. Increasingly, policies are being advocated which include product bans and substitution especially where "hazardous substances" are involved. These policies are being promoted partly for intellectual or ideological reasons - mostly related to concern about the possible long term build up of hazardous substances in society. But these policies are also attractive as a regulatory convenience - it being easier to control substances by banning them before they are used rather than to have to inspect and control them during production and use.
(b) Use risk, not hazard
In the real world, it is not always clear what is "hazardous" and what is not. The process of hazard assessment and classification is itself full of over-simplifications and political compromises. This is especially true for naturally�occurring substances like metals and metal compounds. Very few hazard classifications are sufficiently unambiguous that they should be used to trigger absolutist policies such as bans or mandatory substitution. Industry should know that it is risk management that should drive decision-making not hazard.
Industry should know this... but it does not always say it. Some companies are embracing the concepts of the pressure groups and incorporating them into their own policies. The reasons are not clear - part image, part the wish to keep their lives simple, part because they may think that the proponents of bans have already won the political battle.
As a reality check, I refer you to the February edition of the BSSA Newsletter. This included an article on the Philips Electronics environmental publication entitled "Greening your business". Much of this language is evolutionary, similar to the language that I used earlier. Philips' self-imposed targets include "15% reduction of packaging". "25% reduction of energy consumption". "35% waste reduction" "25% water reduction". But regarding "hazardous substances", the language is more absolutist - "elimination" not "reduction". According to the article, Philips manufacturing appears to have set itself the target of achieving a 98% reduction in the use of category 1 hazardous substances. Ninety-eight percent reduction!
When a company like Philips is basing its policies on hazard rather than risk, it is clear that we will have a struggle to achieve the mature dialogue about risk to which I was referring earlier.
And this hazard based thinking has already influenced European end of life regulations - for automobiles and electronic goods. It will also probably feature in construction waste regulations. Clearly if we wish regulation to be based on risk assessment rather than hazard, we have some work to do.
We can expect strong pressure to exclude products containing hazardous substances from EU eco-labelling, eco-indicator and eco-design schemes. These in turn could be incorporated in public procurement guidelines.
(c ) Treat substitution with care
We can expect strong pressure for products containing hazardous substances to be replaced with products that do not contain hazardous substances wherever possible. All of us in the metallurgical industry know about substitution - evaluation of competitive alloys and materials is part of our daily lives. But we also know that it is very rare for a potential substitute to deliver all that its promoters promise. In the real world, materials are selected as a result of a series of experience-driven compromises and system optimisations. Full impacts of substitution, including costs and other compromises, are rarely obvious in advance. Yet we see "substitution" being promoted as a key policy on which market access decisions will be taken. We must work hard to get our regulators to accept that while substitution may have some role to play in the future, it is not a panacea and should not be promoted beyond its practical ability to deliver.
What has this got to do with stainless steel and its market access?
With luck and a lot of effort, very little. Stainless steels are alloys that show particular properties - none of which are considered to be particularly hazardous to humans or to the environment. So if commonsense prevails, stainless steel will not be on the list to be eliminated or substituted. Products made from stainless steel will be entitled to qualify for eco-labelling and eco-design certification. And we will all live happily ever after.
But we must not take this happy outcome for granted. Stainless steel is made from elements that can be hazardous in certain circumstances and that might well be held to meet the requirements to be classified as "hazardous". What then for stainless steel? We metallurgists know that stainless steels are alloys that have special properties. They do not act as if they were mixtures of component elements. But regulators do not understand alloys and find it very difficult to produce regulations to reflect the special properties of alloys. They need our help.
But even if they accept the special nature of alloys, it is a big jump to them accepting that a "safe" alloy can be made from mixing together several "hazardous" elements. We have a lot of work to do to encourage them to make this jump.
If we fail, and alloys are regulated as if they are mixtures of elements, then the market consequences for stainless steel can be serious. In the worst case, stainless steel could be classified (and labelled) as hazardous, subject to reduction or substitution pressures and omitted from eco-labelling schemes. Remember that 98% reduction target of Philips.
So to ensure general market access for stainless steel, we need to ensure that:
- regulations relating to metals and alloys are based on risk and not simply on the classification of hazard.
- stainless steel is regulated as an alloy and not as a mixture of elements.
Both goals are easy to say but very challenging to achieve. The nickel industry is collaborating very closely with the stainless steel industry on a range of activities to support these goals - including science programmes and regulatory liaison programmes. We are about to start a socio-economic impact study that will look at the socio-economic impact of various regulatory options. We will need the active help of the stainless steel industry in this study. Above all, we need to work together politically. Science alone will not win market freedom for stainless steel. We need to present our case with vigour and skill. We will need to use all the combined political leverage that our industries can mobilise.
Ensuring access to specific markets
In all the above, I have been talking about general market access considerations. Parallel to this there is a lot of activity regarding specific market access. Again we have the same common elements. Regulation on risk or hazard? How to get appropriate treatment of alloys?
In the EU, for specific materials use sectors, there is a clear regulatory trend towards the using positive approval schemes, which operate by listing the materials that are approved for use for specific applications. There is in development a positive approval scheme for materials in contact with drinking water. We can expect a similar scheme for materials in contact with food. In both, nickel and stainless steel have been working together to ensure that stainless steels get positive approval. So far, stainless steel seems to be getting fair treatment.
But the price of freedom is not just eternal vigilance. It also needs:
- very close collaboration through the supply chain.
- a considerable expenditure of cash - mostly to fill our important data gaps
- and a considerable expenditure of energy - nothing is achieved easily or quickly.
In summary:
In the brave new world of sustainable development, there is probably a very bright future for stainless steel and, with it, for nickel. But to turn this probability into a certainty, both stainless steel and its raw materials suppliers will need to work closely together.
- first to improve the performance and the perception of their industries and their products, and
- second to use our political resources to require that our regulators follow meaningful, sensible and
proportionate policies relating to risk.
