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September 29, 2020

Cost-bitten & tech-shy

Business

September 29, 2020

LAHORE: Disruptive technologies have uprooted numerous established industries in the developed world. Their high efficiency and small workforce made it impossible for older technologies to survive.

And when the world was moving on leaving behind their discontinued technologies, the developing economies imported them for their domestic markets. Ironically even that obsolete technology was much more efficient than the obsolete technologies in vogue in developing economies. However, further improvement in disruptive technologies is making life difficult for older industries in countries like Pakistan.

Highly energy efficient and speedier plastic moulding machines are producing up to eight articles from the molds at the same energy against one article made by obsolete machines in Pakistan. The cost of production from state of art plastic moulding machines is thus eight times lower and the labour required is also equally less.

The progressive entrepreneurs scrambled to acquire new technology to stop the import of finished plastic products in Pakistan. In the same way the energy saving spindles installed by our competing economies consume 40 percent less power (spinning is power-intensive industry) and produce more yarn per hour.

Plus, these machines need one-third the labour than what is required by conventional spindles. Again, Pakistani spinners are scrambling to acquire new technology to stay competitive. Those that fail to upgrade are slowly closing down.

Steel-making industries in Pakistan are still operating on old processes by first producing billets from scrap or raw steel and then making rods used so extensively in the construction industry. The conventional steel-making process usually takes several days. Stuffing scrap in a furnace to melt it into a semi-finished product known as billets is followed by a cool-down period. The intermediate product is then reheated and rolled into grey steel bars. This technology is in vogue in the United States and Europe but has not reached even China because it is capital intensive.

A Pakistani steelmaker is introducing a disruptive technology that’s going to cause a tectonic shift in the country’s industrial landscape. Agha Steel is in the process of setting up a steel-making plant based on state-of-the-art technology, i.e., Micromill Danieli (Mi.Da), manufactured by Italy’s Danieli Group, which is the world leader in producing electric arc furnaces (EAFs).

The project, to be set up in Karachi, will dramatically shorten the steel-making process and result in lower costs, higher turnover, and reduced energy use. The new Mi.Da technology will reduce the whole process to just a couple of hours. It will use an endless casting and rolling procedure to make the final product. In other words, melting, casting, and rolling will be carried out in a single continuous and uninterrupted production cycle -that too in only two hours. The man-hour savings are far from insignificant.

The process is based on the direct connection of the continuous casting strand to the first rolling mill stand, with an “endlessly cast” billet of indefinite length being fed directly to the mill through an EAF.

As a result, the traditional reheating furnace will no longer be necessary. The manufacturer will save about 300kWh/ton, sparing about 1.5 million kWh of energy for the use of others. It will save the country about Rs70 billion on account of import substitution only. The disruptive technology will increase the production capacity of rebars from 250,000 metric tons to 650,000 MT per annum. The technology is ultra-compact, i.e., it covers an area of approximately 11,000 square-meters, or less than half the space required for a traditional mill of similar capacity.

It does not come cheap. Agha Steel, a family-owned business, is putting up more than one-fifth of its shares for sale to generate funds for acquiring the latest technology. The company already had the advantage of operating the mills through electric arc furnaces since 2012. Most of the steel units in Pakistan still use induction furnaces. The EAFs have lower energy costs than induction furnaces. They will save the cost by almost 180 units per MT -up to 25 percent of the total electricity cost.

Moreover, the EAF technology is fully compliant with the current environmental regulations as opposed to the conventional technology. This is the reason the induction melting facility of up to 140 million tons per annum was banned in China in 2017. The EAFs also make it easier to charge materials and as a result a recipe can be customised as per a customer’s specific requirements. In contrast, traditional induction furnaces follow a fixed recipe process. The EAFs are also less labour-intensive and save the labour cost by up to Rs200/ton. Their efficiency is 10 percent higher in terms of yield recovery than those of induction furnaces.

Fuel and power account for around 20 percent of the cost of manufacturing, use of the latest technology, and efficient production process. Steel bar rates would only go down when the new technology is acquired by all steel plants. In the current scenario those who have the technology advantage will go a long way, while the ones who fail to catch up will become bygones.