[Closed] British steel- I'm being abit thick here. Please explain.

I think it is impossible to make steel profitably in this country at this time. Cant see a management buyout being successful as the money needed is eye watering.

Very grim times for Port Talbot and the surrounding area, the knock on effects in the area will be enormous.

pretty sure the management of the steel plant would be better placed to answer that question. I guess since they run the place they would be able to work out how it could become profitable. On radio 4 they said Tata in the UK are losing a million a day, sure that can't be right and if it is they are very lucky that they have agreed not to close the plants immediately.

RBS lost ~£5 million a day last year and thats state owned...

Very grim times for Port Talbot and the surrounding area, the knock on effects in the area will be enormous.

Enormous doesn't begin to cover it. The town where I was born and still live was booming and prosperous when I was a kid but since the steel industry "collapsed" in Scotland and the steelworks closed in 1992 the whole town has been decimated.
24 years later it's never recovered.
These poor people have a long road ahead and have my unending sympathy.

Mrs Feet works for TATA in Shotton. It's not going to be a good few weeks 😥
TATA have been losing money hand over fist for years. The Chinese and Russians have flooded the global market with cheap steel and the UK just can't compete with he prices.
Don't know where this puts a UK co that just can't compete on price.
It looks like the plant in PT will close unless the UK refuses to import cheap stuff and starts using its own steel.

perchypanther - Member

Very grim times for Port Talbot and the surrounding area, the knock on effects in the area will be enormous.

Enormous doesn't begin to cover it. The town where I was born and still live was booming and prosperous when I was a kid but since the steel industry "collapsed" in Scotland and the steelworks closed in 1992 the whole town has been decimated.
24 years later it's never recovered.
These poor people have a long road ahead and have my unending sympathy.

The government need to deiced, quickly, whether they want a Northern powerhouse or a Northern Shithouse. The same, effectively, applies to Wales too.

IMHO the Chinese are dumping and the reason their government subsidies this is a huge fear of political instability resulting from unemployment. FWIW, looking at this impartially, china are themselves having many steel works closures - Google for "China rust belt".

Strategically, as well as locally (as you say, places where steel creates a large share of the jobs will seldom recover) there needs to be swift action. The rest of the UK manufacturing economy does need some security of local produce to remain in the game, as much as I hate subsidies.

Large industrial plants tend to be "sticky-down", as in when one shuts, the land either goes derelict or is re-approriated (housing or retail) and it is very, very difficult to get planning permission to build new plants, not to mention often prohibitively costly in any case to construct to meet new building and planning regulations.

It looks like the plant in PT will close unless the UK refuses to import cheap stuff and starts using its own steel.

The other difficult issue to deal with here is that other industrial users of steel (who employ more than the UK steel industry itself) have an interest in getting cheap steel. In other words, slap tariffs on steel imports and you probably end up hurting the wider economy more.

I leave out the strategic implications of not having a steel industry in the UK in my comment above. I'm not sure why we still operate in the same market as the Chinese do - is there a value chain to move up or is the process so well defined that its difficult to get any technological comparative advantage?

Its losing a million a day. But in comparison, how much will it cost the country to have an entire areas economy completely decimated, with the resulting dependency on benefits, implications for health, etc, etc, etc........?

But the government won't do anything because its ideology dictates that the state doesn't intervene to bail out industries...

Except when it does. Like when it involves their mates. In which case there are limitless public funds available...

Well 365 million a year is a fair bit... Then you still need to find customers for over priced steel.

Ravenscraig?

Note sure if that is what perchy was talking about specifically but I can attest that it is an accurate description of what happened in Lanarkshire.

There is a lot of anger towards to UK Gov regarding this. The Chinese and Russians don't adhere to the same manufacturing standards/health and safety/staff wages/and countless other costs. So it will always be a cheaper option.
The Govt has been happy to allow the import of this stuff into the UK market. Can't see a way back now.

[i]On radio 4 they said Tata in the UK are losing a million a day, sure that can't be right and if it is they are very lucky that they have agreed not to close the plants immediately. [/i]

I've worked in the aluminium industry and in simple terms costs are usually very stable whereas the selling price is usually linked to the [b]Metal Price[/b].

At the time our bonus was linked to profitability and when the cost-of-sale was about $950 and the Metal Price was $1000 we got no bonus. One year the Metal Price was nearer $2000, and our bonus was 37% of gross salary. Costs hadn't changed.

http://www.tradingeconomics.com/commodity/steel

This graph seems to explain it, although no idea what occurred before 2010.

[i]There is a lot of anger towards to UK Gov regarding this. The Chinese and Russians don't adhere to the same manufacturing standards/health and safety/staff wages/and countless other costs. So it will always be a cheaper option.[/i]

I would imagine that our electricity prices are a far bigger problem, especially with the various green taxes and large-user conditions.

It's not a new problem, I seem to recall the steel for the Riverside stadium in Middlesbrough which is a short walk from the steel works was built using German steel as local was completely uncompetitive.

The lack of production capacity also hurts the recycling ability and will lead to steel being shipped half way round the world to be reprocessed just to be sent back again.

I think there is a strong case for nationalising the industry, unfortunately I can't see it happening.

Ravenscraig?

Yup. I worked there after it closed as a security guard. My older brother started an apprenticeship which he never got to finish. My dad worked there for a time in the joiners workshop. My father in law was a steelworker. Every house in the street where I grew up had at least one person in it who was directly or indirectly employed by the steel works.

In the space a few years my town went from a buzzing, prosperous happy place to an utter shitehole of an urban wasteland.

Which is a great pity because it's actually a nice place if you can see past the devastation.

Now the only shops in the town cater for people who don't have jobs. Nobody who lives here and has a job shops here.
The town is now just a bedroom for workers from Glasgow and Edinburgh because property prices are so low. You can buy a flat for less than the price of Ford Focus if you're so minded.

My heart goes out to people of Port Talbot who have the same fate in their future.

Its losing a million a day. But in comparison, how much will it cost the country to have an entire areas economy completely decimated, with the resulting dependency on benefits, implications for health, etc, etc, etc........?

+1 Even if it is £365million per year, if it keeps a whole town's economy afloat it could be a bargain. They can then focus on job creation outside steel. It's easier to sell potential investors with a skilled, motivated, employable workforce, than an unemployment black hole.

Also once you turn the oven's off the refractory collapses as it cools, so even if you can put the whole workforce on gardening leave, you still need to keep the plant warm or it costs more to re-start it. This was the issue in Redcar, the negotiations were so fraught because the staff on site were eeeking out the little coal that was left on site trying to keep the fires lit.

Like when it involves their mates. In which case there are limitless public funds available...

Any "real world" examples of limitless public funds being made available?

I was working on an MBO before Xmas. It sharpens the mind when it's your own money. Investing in a capital intensive (no longer labour intensive interestingly) business in a grossly distorted industry doesn't sound that attractive hora does it? The news last night had little specific in term of how a recovery plan was going to work.

Guess you take a view on steel prices, assume a £1 acquisition cost and liabilities of £400m pa, a future exit price and discount it back. Ballsy stuff when every global steel producer is in pain. A case when public and private sector should be engaging their collective wisdom.

Any "real world" examples of limitless public funds being made available?

Were you living off-planet for a couple of years around 2007/8?

Difficult to know where to start really, but [url= http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8262037/Bank-bail-out-adds-1.5-trillion-to-debt.html ]this might help[/url].

Maybe you should just Google 'UK Bank Bailout'?

I'd sit down though. You may be in for a bit of a shock

No I was deeply involved with banks at the time, why?

Remind me of the limitless public funds made available to friends?

[i]Any "real world" examples of limitless public funds being made available?[/i]

Pretty much any project run by the Govt?

He's one, £8bn

http://www.theguardian.com/politics/2011/feb/22/mod-weapons-project-8bn-waste

And here another +£150m, pretty much every year for DEFRA and the EU payments, plus doubled now that Scotland also does them:

http://www.computerweekly.com/news/2240242763/What-went-wrong-with-Defras-rural-payments-system

Bless.

THM. You are funny. You really do demonstrate, along with dear old Jammers, on a constant daily basis, that you lot in finance just inhabit some weird, other-wordly parallel universe, that has no comprehension of life as lived by the rest of us mere mortals.

For pure comedy value, you're almost worth the tens (or is it hundreds) of thousands of pounds you've cost each and every single one of us. But that doesn't fall into the catagory of 'limitless though?

Big?
Bigger?
Very big?
Absolutely ****ing enormous?

Which is it that best covers it?

😆

binners - Member

Any "real world" examples of limitless public funds being made available?

Were you living off-planet for a couple of years around 2007/8?

Current Chinese competition is state subsidised.

Closure of these plants is, effectively permanent.

The cost in terms of ongoing unemployment benefits paid out, plus numerous serial failure "enterprise" schemes, which likely only make various quangos fat is not inconsiderable or easily definable.

Thanks for the link and the complement binners. However, can you still help me with the specific point - a real world example of unlimited public funds being made available - we can leave the friends bit for now and just focus on the first bit.

Now not far away a government did make an unlimited commitment which effectively led to their default, but still struggling to find a recent UK example.

Looking forward to your assistance....thanks in advance

From the comfort of a comfy chair, I can recall posting on here that (to take a specific micro issue) Darling was lying when he said that deposits were safe. They were not. Only a portion of them were protected. Pays to be accurate when you are talking about other peoples' money.

Is there any big need for steel in the UK?
How much production is left requiring lots of it?

12 years ago in Denmark i was making steel chimneys for the UK, one for Corus redcar ironically, using steel from Sweden and Finland.

Kind of reminds me of Kellingley colliery, which used to supply coal to the Ferrybridge, Drax & Eggborough power stations, all within say 20 miles of Kellingley. Cheaper to import coal from Poland (?) than supply it within the neighbourhood. Bingo, no more Kellingley.

THM so what would you call the bank bail out?

as the costs of production are so much lower due to energy, labour and other environmental costs its time to level the playing field + stop shipping pollution, etc overseas.

expecting producers here to comply to the standards we've set is fine but then too allow them to be undercut by external producers because we only look at what we are doing here is at best lazy

Time for a taxation based upon Carbon or set maximum embodied carbon levels for commodities sold in Europe

unlimited

I agree with Binners, to all practical intents and purposes £850billion (or whatever it ended up costing) was 'limitless', because there never seemed to be a cap on it, money was thrown at the problem until it stopped being a problem.

Or to put it another way, keeping the steelworks open for the next 2300 years would cost about the same as the bailing out the banks.

Another interesting Radio 4 programme called The Untold and hosted by Grace Dent was a short documentary (I suppose I'd call it that) about Sanjeev Gupta (and his family business) and Liberty Steel in Newport. They're working on a much smaller scale and are buying in slab rather than making liquid metal, but it certainly seems as though the setup is aimed at integrating the whole supply chain* and making it sustainable. They also own a local power plant.

*this is what has been happening in this sort of industry for a long time now anyway, but it seems to me that there's a point that a complete value stream integration become unwieldy and parts of the business get spun off (Rio Tinto did it with Alcan, then subsequently Hindalco did it with the upstream parts of what was Alcan, as two examples). Owning the whole supply chain means that costs can be spread across the business and the loss-making side (if there is one) can be supported by the more value adding sections (in metal processing it's the finishing end that does this). Tata did this to a large extent though as it owns everything from blastfurnace to final sheet (in PT's case). Not sure if they owned or had stakes in iron ore or coke production though.

In a completely different area, Rolex own almost all of their supply chain.

(I like that 2300 year analysis Thisisnotaspoon :-))

Biscuits, anyone..?

Bike Park Port Talbot could be quite nice. Big sand dunes of the back for playing around on fat bikes - and plenty of interesting architectural features to build some totally way sick lines off of.

Jus' sayin.. 😀

I'd strongly support some kind of cash injection with public money for the following reasons:

1) It has made money in the past
2) It's a strategic industry
3) British steel is decent quality and we know what we buy, there are plenty of bad stories around far east firms shipping steel with forged certs etc.
4) It'll cost the public more in the long run if Shotton, PT etc. shut.

However, the caveat to giving the money would be that there is a plan to get customers and make money (say over 5 year period). Also the one thing British Steel has always done badly is marketing, so since the UK has some of the best in PR and Marketing, lets use them to give the steel industry a leg up globally.

[img] [/img]

THM - heres a picture of Gordon Brown dumping huge (but not limitless) quantities of taxpayers money into an absolutely *** huge pit marked UK Banking Sector.

As someone who works in that sector though its just nice to see the typical contrition, humility and gratitude, and displaying such empathy with people in other industries facing financial difficulties 😆

This is the reality of Globalisation. Just like your own shopping habits, you find something cheaper elsewhere, you buy it. The Chinese in this case are offering steel at discount prices, our own product can't compete. No different to Coal, cars, motorbikes, clothing. Decent wages and a strong pound mean we're gonna be importing stuff instead of making it ourselves. And since we've sold off the control of the manufacturing base we'll just have to stomach it.
Makes me think we're back in the 80's, unloved Tory government, strikes, EU membership, terrorism and the Falklands back on the agenda!

ollybus - Member

This is the reality of Globalisation.

Good summary of what is going on in China right now and why, from their POV, it is also a difficult issue: http://www.bloomberg.com/news/features/2016-03-01/death-and-despair-in-china-s-rustbelt

THM

http://www.theguardian.com/society/2016/feb/05/government-has-no-idea-about-cancer-drugs-funds-impact-mps-say

and

https://www.newscientist.com/article/dn26785-the-uks-cancer-drugs-fund-does-more-harm-than-good/

and finally, what's the bloke who set the fund up doing these days?

http://www.consultancy.uk/news/3085/andrew-lansley-takes-on-health-role-at-bain-company

I agree with Binners, to all practical intents and purposes £850billion (or whatever it ended up costing) was 'limitless', because there never seemed to be a cap on it, money was thrown at the problem until it stopped being a problem.

Upvote that.

Port Talbot alone loses £360m per year. Is that a good use of tax payers money year in year out ? The business is worth less than zero.

As above China has massive overproduction which they are not scaling back and are exporting their very cheap steel to the EU / UK. The EU has done nothing to challenge this.

As posters above have said we all are happy to buy from the cheapet online seller and buyers of steel are doing the same

Banks. Had more banks failed the whole UK economy would have been in very very big trouble, more more pain than was actually suffered. If steel production goes the impact on the UK overall will be relatively limited. I know we've been round this a million times but the bank bailoit averted a far worse recession than the one we experienced.

+1 Even if it is £365million per year, if it keeps a whole town's economy afloat it could be a bargain.

In which case you're talking about having people work in exchange for state benefits.

If we're going to do that, let's make it an industry with a future in the UK (which may or may not be steel) and lets roll it out for everyone who gets benefits.

Surely we have too take a longer term view? The Chinese government must be losing billions upon billions by dumping all this steel onto the world market at below what it costs to produce.

So... for how long is that sustainable? This surely can't go on for long? Or do the laws of economics not apply to China?

Well yeah but they can subsidize by selling us all the plastic shit we used to make....

Hang on.

Except when it does. Like when it involves their mates. In which case there are limitless public funds available...

From which we have determined that the bank bailout occurred undera different government, was not unlimited, and did not involve so-called mates. And with piccies, complements

When The govt closed Consett it was making a profit. Some things are done just to punish people who don't vote the right way.
£365,000,000 a year losses with a workforce of 4,000. The company could pay everyone £45k a year not to come to work and still halve its losses.
Anyway, I thought our steel industry was uncompetitive because it was nationalised/ridden by ineficiency/ hobbled by the unions and that selling it off would lead to a modern, efficient, sustainable industry. Well, perhaps not.

In which case you're talking about having people work in exchange for state benefits.

If we're going to do that, let's make it an industry with a future in the UK (which may or may not be steel) and lets roll it out for everyone who gets benefits.

That would be communism :-p

TBH, I do think that for some industries nationalization is a good thing, either because they're symbiotically linked with the economy (banking), make large sums of money and however private they are can never exist outside the country (oil and gas, power generation etc), or strategically important (transport, why are motorways nationalized, M6 toll excepted, but railways privatized?).

Surely the real problem is so called free trade?

It's not a level playing field. We can always buy cheaper from countries which have lower or no environmental controls and poor working conditions.

If we are going to insist on high environmental standards from our local industries, we shouldn't penalise them by allowing competition from those who don't meet those standards. There should be a way to adjust for that and make it a level playing field, and if that means tariffs based on the environmental savings, too bad.

We're too concerned about protecting the multinationals idea of free trade, and not concerned enough about what's fair for our local industries and workers.

Too many of our politicians are in the pockets of those who benefit from destroying our industries.

Otherwise we end up exporting our jobs, our industries, and our economy, which we have.