Europe's steel industry must invest over EUR 100 billion in CO2 reduction

Press releases   •   Apr 28, 2020 18:54 -12

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  • Technology transition needs to start within the next 5-10 years to meet European climate targets by 2050
  • Steel industry currently emits around 22 percent of industrial carbon emissions in the European Union
  • Hydrogen-based technologies are key to successful transformation
  • Financial viability and international competitiveness depend on state support, all the more given the fatal impact of the Covid-19 crisis

Munich, April 2020: Europe's steel industry is under pressure. The steel-producing sector is currently the largest industrial CO2 emitter in Europe, accounting for 22 percent of total emissions. At the same time, the European Union has resolved to become climate neutral by 2050 in order to comply with the Paris climate agreement. With the methods currently applied to make pig iron and steel, this target will not be met. Companies must therefore convert their production to a new, large-scale and, above all, climate-neutral technology. And time is pressing. Because there are only five to ten years left to decide which new technology to invest in – and the transition has to be completed within 30 years. Roland Berger's new study "The future of steelmaking – How the European steel industry can achieve carbon neutrality" evaluates possible technologies and shows how the transformation can succeed.

"Europe's steel industry will need to invest heavily if it is to reach the EU's climate targets. We calculate that it will cost around EUR 100 billion just to take the production of crude steel from iron ore and make it climate neutral," says Akio Ito, Partner at Roland Berger. However, even this sum could be understated, as global crude steel production is growing and is set to be between 30 and 50 percent higher by 2050. "If companies have to bear the investments alone, they will no longer be able to offer the steel at competitive prices in an already highly competitive market, and that's if they can finance the transformation at all," warns Akio Ito.

Hydrogen-based processes technologically advanced

For the steel industry, there is as yet no conclusive answer to the question of which is the right technology solution for extensive CO2 reduction. Carbon emissions could be reduced by a combination of carbon storage and partial use of biomass in the blast furnace, for example, but not to zero. Other options such as plasma direct steel production or electrolytic reduction processes are at a very early stage of development. That brings great uncertainties for industrial application. "We have examined a range of processes to assess their technological availability, feasibility in large-scale plants and economic viability," says Bernhard Langefeld, Partner at Roland Berger. "In our opinion, hydrogen-based direct reduced iron (DRI) is the most advanced method and – as soon as there is enough green energy available – makes the most sense from a climate perspective.

However, hydrogen-based reduced iron processes cannot be implemented for steel production overnight. Hydrogen production requires very large amounts of energy. "The total energy requirement for climate-neutral steel production amounts to about 120 terawatt hours (TWh) per year," says Bernhard Langefeld. By way of comparison, the world's largest hydrogen electrolysis plant is currently being planned in Hamburg. It can generate just under 1 TWh per year when operating at optimum performance.

Political support needed

The steel industry cannot proceed with developing these capacities for hydrogen electrolysis from renewable energies and corresponding DRI furnaces without risking the competitiveness of its end products. The share of European steel production in the world market has already fallen significantly in recent decades. "Without political support, it is very likely that large parts of the value chain will be shifted from Europe to countries with cheap energy and less regulation," warns Akio Ito. In addition to the potential negative consequences for Europe's steel industry, this would mean that global steel production would continue to be very carbon intensive and thus harmful to the climate.

The EU should therefore take action itself to ensure, among other things, that imported steel and imported steel products meet the same regulatory requirements as domestic production or are taxed accordingly in the future. In addition, a clear framework must be agreed upon to secure the necessary investments long term. "The EU or individual governments should offer such additional tax breaks, subsidies and financing as are necessary to enable steel producers to make the switch. The aftermath of the Covid-19 crisis will add to the financial stress of European steelmakers, making stimulus packages to support green steel transformation even more an imperative," advises Akio Ito. 

Roland Berger, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 35 countries, we have successful operations in all major international markets. Our 52 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 250 Partners.

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Roland Berger Partners count on continuity in vote for new management team and agree consulting package for the corona crisis

Press releases   •   Mar 27, 2020 03:53 -12

  • With new management, Roland Berger is capitalizing on proven minds from all established consulting fields and regions.
  • Supporting customers in current crisis and reactivating economic performance are the focus of consulting approaches.

Munich, March 2020: On March 27th, as scheduled, the approximately 250 Roland Berger Partners from 35 countries elected a new management and supervisory board at the first purely virtual Partner Meeting in the company's history. In light of the corona pandemic, the Partners also agreed a comprehensive consulting package to support clients during the current crisis. The focus of the package was predominantly on the question of how to reactivate economic performance in a controlled manner. In the western world, this will have to take place at a point in time when the corona virus has not yet been completely defeated.

The new Board of Managing Directors, elected for a four-year term, consists of, Marcus Berret, Denis Depoux and Stefan Schaible – all proven faces from the current leadership team. Stefan Schaible will assume the function of Global Managing Partner and Spokesman of the Board of Managing Directors. The Board of Managing Directors and Roland Berger's newly elected Supervisory Board, which consists of Laurent Benarousse, Sascha Haghani, Robert Henske, Yvonne Ruf and René Seyger, represent the diversity of the consultancy across all established fields of expertise and regions.

Stefan Schaible, Global Managing Partner and Spokesman Board of Managing Directors, views the fast and proactive support of customers in the current situation as the consultancy’s top priority: “The spread of the coronavirus is putting our societies and the global economy through an unprecedented test. The protection of the population, in particular of at-risk groups, is the first priority. That is why the worldwide ban on contact and the rescue measures for companies are absolutely the right move. However, the question of how we can boost economic output in a controlled manner is already an important one. In concrete terms, this means protecting the workforce in such a way that production and services can be broadly resumed. This requires a social tour de force in terms of the availability of corona tests, protective suits, breathing masks, disinfectants etc. and the rapid implementation of corona-compatible work processes. German companies with their excellent production know-how are called upon here to first supply the health care system in full and then gradually enable other companies to ramp up their operations. We are contributing to this with our “protected ramp-up” approach, which focuses on human and economic factors.”

Thanks to its broad setup of industries, Roland Berger is currently providing many clients with acute support in response to the economic impact of the corona pandemic. These days, many companies are setting up so-called Emergency Rooms and 360-degree check-ups. Ad hoc measures are primarily aimed at avoiding liquidity shortage, securing the confidence of investors and banks, and, if necessary, securing government aid. With its proven experience in restructuring and corporate performance improvement, and its established industrial expertise in key industries, Roland Berger advises on sensitive decisions that safeguard business, enabling companies to cut costs in the short term while maintaining their growth potential. The services described above are available remotely, as is appropriate to the situation.

Roland Berger's globally integrated consulting fields allow it to bring together impressions from international market and industry trends. With analyses on the economic impact of COVID-19, the consultancy is outlining possible scenarios and helping companies assess the consequences of the crisis. Based on these findings, companies work with Roland Berger experts to develop industry-specific, regional solutions for acute operational challenges and define responses to medium-term changes in the business environment, ensuring that competitiveness can be secured sustainably.

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Roland Berger, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 35 countries, we have successful operations in all major international markets. Our 52 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 250 Partners.

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The PE sector focuses on the further development of portfolio companies: Sustainable business models are becoming increasingly important

Press releases   •   Feb 24, 2020 19:31 -12

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  • Companies see sustainability as an increasingly relevant criterion for their portfolio management
  • 70 percent of experts are preparing for an economic downturn in Europe
  • PE professionals consider the markets in Scandinavia, Italy and Greece to have the most promising outlook in 2020

Munich, February 2020: The issue of environmental sustainability is having an increasingly concrete impact on investment behavior in the private equity industry. Among the most important criteria for portfolio management, this topic has the highest increase (5%) compared to the previous year and thus ranks among the top five portfolio value creation measures. This is one of the core findings of the "European Private Equity Outlook 2020", for which Roland Berger surveyed around 2,500 PE experts across Europe.

"Investors' increased attention on environmental sustainability not only reflects the strong public sensitivity to environmental issues," says Sascha Haghani, Member of the Global Executive Committee and Head of Restructuring, Performance, Transformation & Transaction at Roland Berger. "Today, the climate compatibility of an investment portfolio is also a key factor for the value of assets.”

Weak economy leads to investments in cyclically resilient companies

Overall, the industry is cautiously optimistic about 2020, with around a third of those surveyed expecting no change in M&A transactions with PE involvement compared to the previous year, while 29 percent expect a slight increase. However, 42 percent of those surveyed expect the European economy to decline slightly; more than two thirds of PE professionals (70%) are preparing for a potential economic downturn.

"Investments in stable companies that are less susceptible to economic fluctuations are considered to be the most effective measures to prepare for a downturn," says Christof Huth, Partner at Roland Berger. The focus of activities is therefore also on consolidating portfolios. The low interest in new business may also be due to the valuation of the markets; 94 percent of PE professionals currently consider the market to be overvalued.

Big differences between regions

The forecast development of the PE market differs significantly between regions. For example, M&A activity in Scandinavia is expected to grow by 2.3 percent compared to 2019. The experts also anticipate a catch-up effect for Italy and Greece, with growth of 1.5 and 1.4 percent respectively. Great Britain, DACH and France are expected to remain stable in 2020.

The sectors with the highest expected M&A transactions with PE involvement have not changed fundamentally compared to previous years. In 2020, most experts (90%) expect Technology, Software & Media to take the lead, followed by Pharma & Healthcare (81%) and Business Services & Logistics (59%). At the bottom of the scale are the automotive (7%) and construction industries (11%).

"Investors continue to be particularly interested in companies with innovative technological approaches from which they expect high growth rates in the coming years. In addition, small and medium-sized companies in particular are still considered promising targets in 2020," explains Christof Huth.

Roland Berger, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 34 countries, we have successful operations in all major international markets. Our 50 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 230 Partners.

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Investments in AI startups rise to USD 4.7 billion in Europe in 2019

Press releases   •   Feb 10, 2020 20:00 -12

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  • Total investments more than double since 2018
  • Europe's leading countries are France (USD 1.3 billion) and the UK (USD 1.2 billion)
  • AI ecosystem in Europe much more fragmented than in China or the US
  • Brexit adds complexity

Munich, February 2020: Within the European AI ecosystem, the UK recorded the most new startups in 2019. In terms of investments made, France is in pole position with USD 1.3 billion, followed by the UK (USD 1.2 billion), Israel (USD 902 million) and Germany (USD 510 million). The total volume of investments in the European AI ecosystem rose by around 50 percent over 2018 figures. This is one of the findings of the study entitled "The road to AI – Investment dynamics in the European ecosystem" published by Roland Berger in collaboration with France Digitale, Europe's biggest association for startups, which unites 1,400 digital startups and more than 100 investors. The study encompasses 28 European Union Member States (including the UK) plus Norway, Switzerland and Israel.

"Many of the developments are very positive – they show that Europe's AI ecosystem is still experiencing strong growth," says Jochen Ditsche, Partner at Roland Berger. "But compared to China and the US, Europe's AI ecosystem is too fragmented and suffers from a lack of integration." He goes on to say that Brexit could exacerbate these problems.

Chinese investors underrepresented
France, the UK, Israel and Germany accounted for a good 80 percent of investments in the period 2009 through 2019. American investors are well represented among the top five sources of overseas funding in each of the countries: Last year US investors accounted for 17.5 percent of foreign funds in the UK, 14 percent in Germany and 7.5 percent in France. Chinese investors, on the other hand, are barely present at all. Europe's AI ecosystems still depend strongly on domestic investors.

"The funding of AI startups only really began to pick up pace in 2014," explains Emmanuel Touboul, Managing Director of Roland Berger Tech Ventures in Paris. "Since then, annual growth rates have been in excess of 50 percent." In concrete terms, a mere USD 528 million of funding was invested in AI startups across all of the countries in 2014 – not much more than was invested in Germany alone in 2019.

Europe is overly fragmented
In spite of the strong growth in Europe, there is still a lack of coordination between the individual countries across the continent. For example, a European patchwork of approaches has emerged out of all the different interpretations surrounding the General Data Protection Regulation. "Europe cannot be allowed to continue to get lost in details," says Emmanuel Touboul, sounding a warning note. "We need a strategy that safeguards the free flow of data, creates synergies between countries and balances out the nations' different strengths and weaknesses with regard to patents, infrastructure, investment capacity and skills shortages."

The UK plays a key role in Europe's AI ecosystem. In a country-by-country comparison, the UK spends the most on research and development and files the most patents. "Brexit could hinder access to data even more and endanger Europe's innovation and dynamism across the entire continent," cautions Jochen Ditsche. "That is why we need to make sure there is a comprehensive and forward-looking framework in place between the EU and the UK so that digital entrepreneurs and investors can continue to operate in a growth environment."