Stand up for steel

As another wave of closures and redundancies hit the Welsh and UK steel industry, what can governments do to retain this vital part of the economy? Roy Rickhuss, General Secretary of Community gives some answers.

Steel has been a foundation of Welsh economic life for decades.  The importance of the steel industry to Wales, economically but also culturally, historically and in terms of regional and national identity, cannot be overstated.  A 2012 economic impact study by Cardiff University’s Welsh Economy Research Unit found that Tata Steel supports 1.22 additional jobs in its supply chain for each of its 8,000 direct employees in Wales, meaning that in effect nearly 18,000 jobs in the Welsh economy are dependent on the company. The study also showed that the global steel producer supported £3.2bn of output and £1.6bn of value added in Wales.  Since that report there has been some restructuring involving voluntary job reductions within the company and there has also been a significant amount of investment. The £185 million rebuilding of Tata Steel’s Port Talbot Blast Furnace No. 4 was the largest industrial engineering project of 2012, not just in Wales but in the UK.

While Tata may grab the headlines it does not represent the full extent of the Welsh steel industry. Other notable steel companies where Community represents steelworkers include the Celsa Group and Caparo, which together employ thousands of workers in Wales and have a similar effect on jobs in their supply chains and surrounding communities. Wales is also home to a plethora of independent steel stockholders and processors.

The economic downturn in 2008 hit the steel industry hard and the recovery has been difficult.

Our members have played their part in countless initiatives to ‘weather the storm’ and to help increase productivity within their businesses. Intervention by the Welsh Government in the form of its ProAct and ReAct programmes played an important role in assisting major Welsh steel producers through the deepest part of the crisis. The recovery has been a long time coming for steel producers and steel demand within Europe still remains at least 25 per cent lower than its 2007 peak.

The competitive challenges faced by the industry are ever-present.  There are four key ways we want governments to Stand up for Steel, which we believe if implemented would help to create a sustainable future for steelmaking, not just in Wales but right across the UK.

Cost of energy

Perhaps the biggest issue faced by steel producers in Wales is the cost of energy when compared to competitors in France or Germany. A report by the TUC and the Energy Intensive User Group (EIUG) found that energy costs for UK producers could be over 50 per cent higher than those paid by German steel companies. This is through a combination of higher basic energy costs coupled with a number of unilateral environmental levies on energy such as the Renewables Obligation or the Carbon Price Floor, which fall heavily on energy intensive users such as steel.

The Welsh steel industry sees itself as part of the solution to climate change through both its production methods and its products. Following significant investment, Welsh steel producers are among the most carbon-efficient in the world. For example, in 2006 the Celsa Group invested £90 million in a new electric arc furnace at its Cardiff operation. This made it probably the most energy efficient plant of its kind in Europe. Despite this, as revealed in the ‘Walking the Carbon Tightrope’ report commissioned by the EIUG and TUC, Celsa faces significant challenges to compete both in terms of investment within the Celsa Group and in the wider market. This challenge is overwhelmingly accounted for by higher energy costs.

Following calls from unions and industry for action, the previous UK coalition government announced a billion pound compensation package for energy intensive industries aimed at offsetting these higher, uncompetitive costs. However it will not be fully implemented until April 2016. Community’s first demand is for the compensation package to be brought forward – a year is too long to wait.

No Dumping

Overcoming the challenges created by energy and environmental policy would be sufficient enough but there are other areas that are impacting on steel production in Wales. Most of the recovery in UK steel demand has been taken up by foreign imports and there are increasing concerns over dumping.

Imports of rebar steel from China and Turkey are a particular concern and have increased dramatically over the past year. Until recently the Chinese have sold almost no rebar in Europe as the transport costs alone should be prohibitive. Community shares concerns of many steel companies that products from outside Europe that fail to meet British Standards are entering the UK construction supply chain, with potentially serious implications for the future structural integrity of buildings.

Our second demand is that the government takes action in Europe and globally to stand up for the UK steel industry by supporting the European Commission’s efforts to stop steel product dumping. Government should also ensure that imports of steel products meet British standards.

Better Procurement

The third thing we want governments to do is to make effective use of their procurement powers to support UK foundation industries such as steel.

Crucial to this is a focus on using community benefit clauses, which are allowed under EU procurement rules. This allows procuring authorities to give greater weighting in their decisions to companies that will bring benefits to the local community, which could be through local jobs, training or other direct benefits to a community. The Welsh Government has a better track record than other administrations of prioritising ‘community benefit’ in procurement criteria.

Partnership with unions

Finally, we want government to encourage steel employers to work with trade unions to create a sustainable future for steel. As a union we work in partnership where we can with our members’ employers particularly when we are seeking government action to support the industry. Our decades of experience demonstrate that strong trade union organisation leads to both better pay and conditions and increased productivity.

For an industry of such importance to Wales, which is at the heart of many communities, we hope that governments will stand up for steel and help ensure that Welsh steel making continues for decades to come.

Roy Rickhuss is General Secretary of Community.

A fuller version of this article was published in Exchange, the Bevan Foundation’s magazine for members, in April 2015. To make sure you receive future issues please subscribe here.