Rising to the Challenges of Industry 4.0: How Blockchain Can Revolutionise the Metal Industry
December 1, 2021
Written by:
Stefan Grüll
Reading Time:
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7
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Industry 4.0 is making a transition from strategic hype to operational reality. Bringing breakthroughs in quantum computing, fully autonomous vehicles and machine-to-machine communication, the so-called fourth industrial revolution has a massive potential to improve existing processes, boost horizontal and vertical collaboration and develop new business models in various industries that are willing to embrace digitalisation.

THE STEEL AND METAL INDUSTRY IS NO EXCEPTION

In fact, some companies within the sector have already started implementing innovative digital solutions. Russian Severstal, one of the biggest producers of steel in the world, uses Big Data to monitor irregularities that may occur during steel production, to warn engineers of potential equipment downtime and suggest changes to the most important manufacturing parameters.

TATA Steel Kalinganagar has been greeted at the World Economic Forum (WEF) 2020 at Davos for its recent admittance into the Global Lighthouse Network. The network is a small but growing group of global corporations that are showing leadership in applying fourth industrial revolution technologies to drive financial and operational impact.

Europe’s second largest steel producer, with manufacturing operations in twenty-six countries across five continents, is currently undertaking digital transformation with pilot projects in artificial intelligence (AI), demand forecasting, optimisation of material properties and drone inspection for iron ore raw material sites. The company has announced spending of US$ 100 million in the next three to four years on applying digitalisation to various operational sectors.

Gerdau, a large steel manufacturer in Brazil, implemented Fero labs, process improvement software powered by machine learning, to decrease raw material costs while maintaining quality and to develop new operational regimes that dramatically reduced raw material costs and shortened plant tests. The company estimates that this approach will generate annual savings of $4.5 million per year.  In Asia, China’s main trade association for metals is developing a consortium blockchain to cover the entire steel supply chain. Blockchain will be implemented to address overcapacity, correct lack of coordination within the supply chain, trace the steel from mine to finished product and reduce the risk of fraud.

Industrial giant ArcelorMittal has also joined the bandwagon. The company relies on AI algorithms to analyse and address scheduling challenges. ArcelorMittal’s executive stated that the AI algorithms are vital in some areas, such as defect recognition and quality assurance, as they will lead to higher yields and lower environmental impacts, including CO2.

However, despite embracing the opportunities of digital transformation in some areas, the industry is still lagging behind in others. One of the best examples to illustrate the lack of digitalisation in the metal sector is the continued use of paper-based Mill Test Certificates to trace product quality and compliance.

TO SAY THAT PROCESSES WITHIN THE METAL INDUSTRY ARE PAPER-HEAVY IS AN UNDERSTATEMENT

The European EN 10204 Standard, also known as the Mill Test Certificate, was introduced in 1991. The certificate presents a variety of types of inspection documents given to the purchaser to certify both the chemical and physical properties of a product and its compliance with the applicable norms and technical specifications. It also states a compliance of metal products with specific standards, such as ANSI, ASME, ISO and JIS. It’s a central component of quality assurance and proof of compliance with the terms of the order and the European standards.

And that’s where we come to the problem. These certificates are — still — paper based or in the form of PDF. The process starts when the metal is marked with a heat number corresponding to the numbers on its certificate, which is then signed and sent in paper form. Data contained on the certificate are not machine-readable. If the certificate gets into the wrong hands, it can be copied, modified or even falsified. The end receiver of the certificate can never really verify whether it is an original.

With the 2004 edition, the process of digitisation somewhat began when it allowed the electronic storage and transfer of the documents; however, it ended there. This only led to the replacement of the paper documents with PDFs, not to a completely new digital standard.

As a result, Europe’s steel production sites and processing companies exchange around 100 million paper certificates every year to meet regulatory requirements for material quality documentation.This number is going to increase because of greater safety standards and ambitious sustainability goals regarding CO2 emissions. The EU endeavors to have a net-zero greenhouse gas emissions economy by 2050 in line with the EU’s commitment to global climate action under the Paris Agreement. Consequently, European steel producers are willing to accept approximately 30-percent higher production costs to support and comply with governmental regulations that require subsidies for ecologically safe produced steel.

Finally, with the rapid development of Industrial Internet machines are becoming increasingly connected to the Internet communicating with each other and exchanging data, requiring machine-readable certificates. However, these documents remain paper-based and non-machine readable thus creating honeypot for fraud, negligence and different kinds of threats. According to the Steel Alliance Against Counterfeiting (SAAC), more than 53% of the steel industry has came across fake products during their day-to-day operations, leaving manufacturers to deal with high costs of forgery and plagiarism.

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Recently, regulatory bodies linked extraction of cobalt, one of the key components of batteries that power the majority of laptops and electric vehicles, to dangerous working conditions, child labour in mines in the Democratic Republic of the Congo, poverty and other social and environmental concerns. The public scrutiny led the London Metal Exchange (LME) to launch an investigation on whether cobalt mined by child labour is traded on the exchange. The LME requested that all suppliers provide details on how they guarantee the origin and production method of traded commodities.

Then, in 2018, Japan’s third largest steelmaker, Kobe Steel, admitted that it had been falsifying the Material Test Certificates (MTCs) of its products for decades. The company elaborated that staff had modified or even made up quality data for its aluminum, copper and steel products to meet customers’ demands. The fraud cost the company millions and led it to undergo a U.S. Justice Department probe and face not only financial but also legal risk. During the investigation, it was also revealed that about 500 companies had received falsely certified products, which affected not only those companies but the entire supply chain.

HOW CAN THESE CERTIFICATES BE DIGITALISED?

Intelligent, online-based solutions can solve this problem and make certificates usable within the framework of Industry 4.0. Technologies, such as blockchain and digital twinning, can be leveraged to create and assign a unique digital identity to a physical product and trace its individual path through the entire supply chain. All steps of upstream production, including trading and processing, are registered, logged and traced with a certificate. Contrary to the physical ones, these digital certificates can be found, analysed and retrieved instantly.Documentation can be attached with the product and easily shared between relevant parties, providing more trust without adding extra layers of bureaucracy.

Moreover, the CO2 emissions associated with the raw material and production of a specific batch can also be added to the quality data of electronic test certificates. This ensures that no less than the total emissions certified by third parties for a production unit or company are allocated to the products. It also provides a secure assessment basis for creating transparency and differentiation of sustainably produced steel products.

THE JOINT VENTURE OF RIDDLE&CODE AND S1SEVEN TO REVOLUTIONISE THE METAL INDUSTRY

RIDDLE&CODE and S1Seven joined forces to address tracing quality within the complex and globally fragmented steel and metal industry. By combining RIDDLE&CODE’s industry-leading blockchain interface solutions with S1Seven’s product that brings digitalisation in the metal industry — Steel But Smart — the two companies are building a blockchain-based notarisation service for metal certificates. They provide a product with a tamper-proof digital identity and trace each step of its journey from raw material to final application.

The service allows metal manufacturers to replace mandatory hard copy documents with digital records and to assess CO2 emissions, immutably stored on a decentralised platform that serves as the industry’s single source of truth.

With each production step, our solution collects this data so that the real DNA of the physical product is available to optimize further processing and use of the metal.This data is not only machine-readable but also immutable, stored and document-proof to conform to the existing regulations. This enables trusted vertical and horizontal integration across supply chain boundaries and a new level of quality management.

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