The Steel Industry

[62613]

Some years ago the Rolls Royce Aero Engine company got into difficulties largely down to failed carbon fibre blades for the RB211. The government at the time, Conservative, nationalised it and ran the company until it was back on its feet and could be sold back to the private sector.

I seem to recall that the Conservative government of the day (or some in it, anyway) were quite prepared to let RR Aero go, along with Upper Clyde Shipbuilders; I think the phrase 'We shouldn't support lame ducks' was used. It was only public pressure, and in the case of UCS, a workers' lock-in, that saved any of it.

[jjb1970]

I think there are many factors to consider and it is difficult to really offer considered opinions within the constraints of a message board. I certainly think a steel making capability is a strategic one which as a country we should maintain, but I also think that the country needs to ensure that any such capability (which may need government intervention to nurture) is viable and not just a repeat of the MG-Rover fiasco where desperation to preserve mass market car manufacture led to the company going to the infamous Phoenix four. And there are some very good reasons why steel production is difficult in the UK, our labour costs are high by global standards, energy costs are high unless the government offers some form of rebate or subsidy and most demand for steel is not in the UK. Add to that an industry which does not seem to be the most modern and it is not as simple as just blaming politicians even though I’d accept that higher level strategic decision making at government level has been less than great going back many decades. Certainly it is not a party political issue as governments of all colours have been less than impressive in terms of industrial policy. If it was as simple as government support then industries like steel and ship building would have thrived under state ownership yet many of the reasons for their demise go back to decisions made in that era (lack of investment, political pork barrelling). Rolls Royce were supported by the government, but aero engines are less dependent upon labour costs and the value stems from high end expertise and capabilities which are very different from steel making. RR got into difficulties because of a particular bad decision with the RB211 and some huge financial liabilities as a result, after a short period under government control they were returned to the private sector as fundamentally they were a good business with good products (other than the infamous RB211 composite blades…) and were fully able to compete internationally. I really do not see that the same can be said about steel making, at least not in terms of international competitiveness.

Arthur’s comment about the German furnaces plundered as war reparations is profoundly depressing to me as it touches upon one of the great national myths which the UK has used as a crutch since 1945, namely that we were on the winning side in the war only to see the USA re-build Germany and Japan with aid money so they could defeat us in peace time. A view which ignores the fact that the UK received the most US aid but unlike Germany and Japan who used their aid for long term rebuilding and economic development we just squandered it and then pretended we’d lost out to others getting the money.

I do hope steel making survives, and I do fully support the government supporting a transition, incentivising investment etc but I do fear we may end up with something that kicks the can down the road for a few years only for us to be in an even worse position after a short period as per MG-Rover.

[Arthur]

As promised, some figures to give some context.

 

All figures are in million tonnes and relate to 2014, the last year for which full figures are available.

 

 

Growth in Global Steel Production and China's growing share, accounting for almost 50% in 2014 .

 

Figures for selected countries.  The figure in brackets in column 1 is the world ranking by output. The US long dominated world steel production, they are now third behind China and Japan.  Note; For the UK these figures include Redcar's output.  Now gone,we have lost about a third of our pig iron production, more than a quarter of our steel production and a large chunk of exports as most of Redcar's slabs, under SSI ownership,were exported. We were producing 1.4% of China's output.  Without Redcar we may still, just, retain our ranking at 18th.  Austria and Poland both produce around 8 million tons.

 

 

Columns 3 & 4 show steel production by process.  Port Talbot and Scunthorpe are (and Redcar was) BOS, that is from ores to pig iron via blast furnaces.  EAF is scrap processing. We rely heavily on production from ore, more so than our European contemporaries, Italy, ranking 11th, produces more steel from electric arc furnaces than we do in total.

 

Column 5 shows the ubiquity of ConCast replacing ingot casting and heavy mills. It was mentioned in terms of quality of output on a related thread and I noted that it was no longer a competitive advantage but a given.

 

 

Column 6 shows blast furnace output, and 7, pig iron consumption, demonstrating that there is minimal pig iron export trade. It is virtually all converted to steel on site.

 

 

Column 7 shows ore imports and 8 ore use. The European countries are almost entirely dependent on imports, Australia and Brazil being the dominant exporters.  The security implications of us losing pig iron production facilities have been raised but we have depended 100% on imported ore for 40 years and on imported coking coal for a good few years too. These are all, scrap too, globally traded commodities.  Fears about our dependence on imported pig iron, scrap or steel are probably over blown  See next.

 

Columns 9 & 10 relate to scrap. Note how much scrap we export, that could be recycled here in EAFs, conversely, Italy's larger industry relies heavily on imported scrap. This is, like it or not, Gupta's vision for Port Talbot. Recycling domestic scrap though on what scale remains unknown.  However, as a mature industrial society we generate a lot of scrap and, like Italy, could become a high volume steel producer through that route reducing our reliance on imports of ore, coking coal and steel.

 

Columns 11, 12 & 13 show that all producers actively both import and export steel.  Answering Mick's point, Germany is pretty much in balance so in a sense yes, it consumes what it produces. We are net exporters but on a much lower base, we use much less steel than do the Germans reflecting a smaller manufacturing base.  China is the major exporter and the US the largest importer.

 

 

The final column tries to give an idea of net use, that is not just the products of steel works but also the end user goods which contain steel, exports vs imports.  China and Germany basically are net exporters of steel and steel containing goods, we are net importers.

 

Hope that's of some interest in putting some things in context.

 

It will be removed at 5:00 pm Wednesday and then, pay attention at the back, there will be a test.....

 

One final point.  Once you have a BOS works of a given capacity you cannot really run it below that capacity. Coke ovens and blast furnaces run for years between relines, they cannot run at half capacity, shut them down and the internal refractory brick work collapses costing tens of millions to reline them. You can bank blast furnaces, keep them hot, but at some considerable cost.  EAFs are much more flexible in this respect. Lining rebuild costs are much more modest.

[MJI]

And 5, in addition to it being everyone elses fault we have rushed to spend our money on goods from everywhere else in the world other than Britain. - That may be because they were better and cheaper, but that's a different debate, and don't let's go there it's very off topic..

 

Let he that is without Hornby/Bachman/Dapol/Honda/BMW/VW/Bosch/Panasonic/Sony/etc. cast the first stone.

 

Peter

 

Most of my Hornby is UK

Will admit to Bosch, Bachmann, Dapol

Sony, two TVs were from the Bridgend plant, not sure where LCD is from

Car is British

[APOLLO]

I have a British car also - hand built by Robots Roberts !!

 

 

Brit15

[Peter Kazmierczak]

With apologies to "The Proclaimers".............

 

Ravenscraig no more

Redcar no more

Ebbw Vale no more

Consett no more

[Arthur]

 

Of those Peter, owing, variously, to combinations of age, size, location and layout, only Redcar would have had a place today. In fact, the big clear out of integrated works between 1970 and 1980 was largely predicted ten years before and none would have seen 1990 as manufacturing works.

 

Ravenscraig survived longer due partly to its modernity, size, product range and political considerations.

[billbedford]

Columns 9 & 10 relate to scrap. Note how much scrap we export, that could be recycled here in EAFs, conversely, Italy's larger industry relies heavily on imported scrap. This is, like it or not, Gupta's vision for Port Talbot. Recycling domestic scrap though on what scale remains unknown.  However, as a mature industrial society we generate a lot of scrap and, like Italy, could become a high volume steel producer through that route reducing our reliance on imports of ore, coking coal and steel.

 

...

 

One final point.  Once you have a BOS works of a given capacity you cannot really run it below that capacity. Coke ovens and blast furnaces run for years between relines, they cannot run at half capacity, shut them down and the internal refractory brick work collapses costing tens of millions to reline them. You can bank blast furnaces, keep them hot, but at some considerable cost.  EAFs are much more flexible in this respect. Lining rebuild costs are much more modest.

 

 

This makes much better economic sense than keeping the present works open for sentimental 'strategic' reasons.

[billbedford]

Of those Peter, owing, variously, to combinations of age, size, location and layout, only Redcar would have had a place today. In fact, the big clear out of integrated works between 1970 and 1980 was largely predicted ten years before and none would have seen 1990 as manufacturing works.

 

There were persistent rumours that Llanwern had much better production figures than Redcar, and that Redcar survived due to some creative accounting by its managers.

[Mark Saunders]

Does any documentation exist for the modernisation plan that BSC was undertaking in the 1970's as there seems to have been big plans or new works and closure of others?

 

Mark Saunders

[Bon Accord]

There were persistent rumours that Llanwern had much better production figures than Redcar, and that Redcar survived due to some creative accounting by its managers.

 

Similar rumours surrounded Ravenscraig with regard to it's efficiency, with many feeling it's closure was entirely politically motivated.

[Barry O]

UK Steel works don't always make the specialist steels used in parts of the remaining UK manufacturing industry. So there are obviously people in the Industry who are really clued up. Perhaps we should be asking them what they think needs to happen? Makes more sense than getting the politicians and Civil service  to do the business "thinking"

 

This happened in the tank manufacturing capacity of the UK - which was based in Leeds and Newcastle and has now moved to Bedford and Wales. Great for people in Bedfordshire and Wales less so for the skilled  people in Leeds and Newcastle

 

Baz

[Arthur]

 

 

Ravenscraig was 50 miles or so from the coast adding considerably to its cost for imported ore*. When built by Colvilles it was planned as a modern steel producing works to supply slabs and ingots to Colvilles other works. At the time RTB were planning the UKs fourth continuous hot strip mill at Llanwern.

 

Political pressure was brought to bear to build this not at Llanwern but to tack it onto Ravenscraig. Colvilles were very reluctant as the demand then in Scotland was for heavy products. They yielded to the pressure and in a typical UK political compromise both Llanwern and Ravenscraig ended up with semi continuous hot strip mills.

 

Ravenscraigs strip mill lost Colvilles £1 million in its first year, a loss soon to be passed on to the taxpayer following nationalisation in 1967.

 

Outlets were found for its sheet products at the new lighter industries in the Central Belt, Chrysler at Linwood, BL at Bathgate, a couple of new white goods plants etc. However, once they succumbed and as the demand for heavy product also slumped, the works was a long way from potential customers, from a deep water port for exports and in an oversupplied market. Llanwern had more modern coke ovens and blast furnaces, it's no.3 being the second largest in the UK and one of only two with a modern conveyor charging system.

 

So, with one too many hot strip mills in 1995, political interference or not, Ravenscraig was the likely choice for closure.

 

 

Had the government of the day in 1950s had real strategic vision they would have forced the build of the fourth hot strip works either on Thameside or on the Solent.

 

 

*As we moved from low quality home ores to cheaper, richer, imported ores post war the ideal works was located with its own deep water harbour able to take 100,000 ton ore carriers. Only two of our works met that criteria, Redcar and Port Talbot. I've written before

 

http://www.rmweb.co.uk/community/index.php?/topic/95085-triple-headed-class-37s-on-iron-ore/?p=2077973

 

the sorry saga of Llanwerns abortive deep water wharf plans. In the end it was supplied by long rail haul from Port Talbot such that it might as well have been built 50 miles inland. Scunthorpe similarly has a rail haul to tag onto its ore shipping costs.

[Arthur]

 

 

I've never come across a single vision that the BSC had for a radical reconstruction involving new works. Yes, various projections were around looking at which works had a future, what changes might take place and some musings on new greenfield works.

 

The formation of the BSC was, of course, political, and it found itself with a large number of very diverse works on its hands. A real mixed bag of old and new, poor and good locations, a rather cosy lack of real competition between them. The latter might be excused by an acceptance amongst the previous owners that, just around the corner, was the next big slump, the industry being notoriously cyclical.

 

I think any big plans it may have had in 1967 were soon out of the window as the economic difficulties of the 70s hit and it spent its energies fire fighting an industry in crisis. It's initial internal organization on geographic lines was soon seen to be inadequate and it was rapidly reorganized on product lines. Even it's earlier plans for closures and rationalisation were soon seen to be inadequate as more works were added to the list. Of 22 integrated works in 1970, 17 had lost iron and steel making facilities, if not closed completely, by the end on 1980. (Staggering statistic, only one, Consett, under Thatcher, no government, of either hue, prevented a single closure)

 

We must remember that the footprint of our industry was set by 1913, only Llanwern was added to the list later. Yes, the works were modernised but they were competing against larger, more modern, coastal works in parts of the world which hitherto had been our customers. Some will remember that for some years the BSC held the record for the largest ever corporate losses worldwide.

 

 

Had nationalisation not taken place, the overall pattern of closures would not have changed much. The privately owned works might have staggered on individually for another few years, closing later than they did but damaging the industry overall. Those that saw the 1990's would probably have been the same.

[Mark Saunders]

Redcar would have been totally diferent as it was planned to have three blast furnaces but only one was built and the second one was used as spareparts for the one that was built!

 

Mark Saunders

[Arthur]

 

It would Mark but it was soon realised that the projections for growth in demand were not materialising. Had they built the other two they alone would have produced as much iron as Ravenscraig, Llanwern, Port Talbot and Scunthorpe combined, what then for those works?

 

DL's Clay Lane plant was originally intended to have six furnaces, BSC deciding instead to build larger furnaces at Redcar.

[jjb1970]

Political interference was the curse of many nationalised industries, it was not uncommon for investment decisions and orders to be directed to those plants with the right political profiles rather than those with the best business case. I remember many years ago attending a lecture given by one of the senior people of British Shipbuilders which was absolutely scathing of the way in which that organisation had been directed to preserve certain yards which were complete lemons at the expense of yards which may have had a future. To be clear he was blunt in saying that most of the UK shipyards would have closed under any plausible scenarios however he did feel some had skills and quality to stand a realistic chance to survive doing high value niche work, but that those were often the first yards to go as they were lacked political influence.

[RANGERS]

Had the government of the day in 1950s had real strategic vision they would have forced the build of the fourth hot strip works either on Thameside or on the Solent.

 

Interestingly when Stewarts & Lloyd were first proposing a new integrated iron, steel, strip mill and tube mill, Tilbury was on their short list.

 

The major pluses were ease of shipping for export of finished products and import of home sourced coking coal; riverside land for development of the works and housing; direct rail links to the ore and coal supplies and a ready local market for the surplus coke oven gas. On the downside, the overall economics of transporting ore, coal and limestone inbound over greater distance far outweighed the lower cost of shipping the finished products (much lower in both volume and weight than the raw materials) outbound. The final choice of Corby was based largely on the location being nearer to the raw materials.

 

Of course as imported ores replaced home sourced, and eventually coking coal as well, the tables turned against the inland sites. It might be interesting to speculate what would have happened if Tilbury had been chosen but Port Talbot is in a similar position and that doesn't seem to have fared any better.

[Arthur]

 

I didn't know that about Tilbury being considered by S&L but it would make sense. Of course, in the mid thirties, the prospect was that the works would use home ores from S&Ls ore fields as far into the future as could be foreseen so the chosen location made sense. There's still millions of tons of ore there, it's just now cheaper to import and smelt high quality foreign ores.

 

Fords Dagenham blast furnace ran very successfully for many years, 1932-1978, on the north bank of the Thames importing ore and taking coking coal by sea from the North East.

 

You're right, today a works at Tilbury, or anywhere else, would be facing the same problems as Redcar and Port Talbot.

[Arthur]

 

RR got into difficulties because of a particular bad decision with the RB211 and some huge financial liabilities as a result, after a short period under government control they were returned to the private sector as fundamentally they were a good business with good products (other than the infamous RB211 composite blades…) and were fully able to compete internationally.

 

Interesting post jjb.

 

I wasn't aware that it was problems with the RB211 that lead to RRs spell of state ownership, interesting story. I had a look at the Wiki entry (yeah, I know) and, on a lighter note, was taken by this;

 

Hugh Conway (managing director RR Gas Turbines), persuaded Stanley Hooker to come out of retirement and return to Rolls Royce.As technical director he led a team of other retirees to fix the remaining problems on the RB211-22. The engine was finally certified on 14 April 1972....

 

Reminded me of those Hollywood films where a bunch of written off, grizzled, veterans are called back to save humanity with their olde worlde skills. Nice one.

[Ohmisterporter]

Many years ago there was a tv program that followed senior managers at BSC whilst they were deciding the future of the company. The chairman was Sir Monty Finniston and they had been called to a board meeting to hear his latest plans. Before the meeting some of them had been talking and the general consensus was that there was too much capacity and they would have to close some plants or reduce output until the economic outlook improved. In the meeting Sir Monty announced his vision for the future: build another blast furnace to increase capacity and save costs by increased volume. All the managers voiced their full agreement with him figuratively slapped him on the back for his brilliance. And there we had an example of why British industrial management was viewed with such a low opinion by our competitors.

[pete_mcfarlane]

 Before the meeting some of them had been talking and the general consensus was that there was too much capacity and they would have to close some plants or reduce output until the economic outlook improved. In the meeting Sir Monty announced his vision for the future: build another blast furnace to increase capacity and save costs by increased volume. All the managers voiced their full agreement with him figuratively slapped him on the back for his brilliance. And there we had an example of why British industrial management was viewed with such a low opinion by our competitors.

 

Surely the two positions aren't totally incompatible? You're effectively using the economic downturn to kill off the older less efficient plants, and by the time the economic problems are over the shiny new large modern plant is finished and able to take up the increased demand. 

[Ohmisterporter]

During my engineering apprenticeship we were shown a film about British shipbuilding, I think it was titled What happened at Fairfields? It showed the changes wrought in that shipyard in the 1960s by management and unions working together to drag their yard into a condition where it could compete on the world market. Union demarcation lines were largely abolished, five year apprenticeships for some trades were reduced and there was generally a more "can do" attitude in the yard. For example, the top dogs union wise were the boilermakers, they were fiercely protective of their turf. In the new system they became flexibly employed, if their own job was completed they could be turned to painting the ship or helping out another trade. There were many other examples but all in all the attitude was to win orders by cutting costs and reducing the time that it took to build a ship. The other yards on the Clyde stuck to the old ways and some were in deep financial trouble. Along came Tony Benn and he decided the way to save Scottish shipbuilding was to nationalise and amalgamate the yards into Upper and Lower Clyde Shipbuilders. Fairfields became a smallish part of UCS and was swallowed by the big yards IIRC John Browns was the leader of it, still working to the old methods with demarcation etc. The plan was not a success and one by one the yards closed. Ironically Fairfields is still open and is building ships for the Royal Navy. 

[luckymucklebackit]

As a former steelworker (BSC Tubes Division - Clydesdale Works 1976-1986) I commiserate with each and every worker who's job is currently under threat.  I remember my first day in the works after a year in the training centre (August 1976), we were being shown where we were to spend the next year of our apprenticeship and an old hand greeted us with the words - "don't know why you chose to work here, it will soon be shut".  Such was the pessimistic attitude among the workforce, it did shut, but not until 1991 and a small part (the Quench and Temper Plant) was retained under French ownership.

 

Much has been said about the badly planned location of works' and the lack of centralised process, but if it had all been planned perfectly we would have missed out on (just for example) the 9Fs etc. slogging up from Tyne Dock to Consett, the triple headed 37s from Hunterston to Ravenscraig, the myriad of interworks trip trains.  The steel industry would have been much more efficient, but the railways would have lost a lot of traffic.

 

Jim

[Arthur]

 

Don't dispute the loss of interesting rail traffic Jim.

 

Just go be clear, the works were not badly situated when built but most went back to the early years of the 20th century. What had been a good location in 1910 was no longer a good location in 1970.

 

I could cite several examples, Consett was built close to local ores, long gone by 1970. Once the local ores had gone, for every ton of steel produced, three tons of raw materials had to be shoved uphill.

 

Irlam was built on the banks of the Manchester Ship Canal with the intention of foreign ore carriers mooring up alongside. Fine in 1913, and through to the 50's, when ore was carried in ship less than 12,000 tons (as big as the ship canal allowed), by 1970, to be competitive, ore carriers had reached 100,000 tons.

 

The world, and the industry, had moved on. Even when we built a throughly modern, greenfield works, Llanwern (1960) 'we' spoiled it by not equipping it with an adjacent deep water wharf.