Steel Strip

It is widely reported that the UK trade deficit unexpectedly widened as exports fell and imports surged during December.

This is despite the weak pound that should help our exports.

What surprises me the most, is that the Government and the press are “surprised” by this.

For many years now, successive Governments have done nothing to support or incentivise manufacturing, relying on the city of London earnings to balance the books. When that sector turned out to be a “house of cards” everything collapsed. A broader manufacturing base could have been the tonic that we need at this time, but instead we continue blindly to export manufacturing jobs, with Corus Teeside and Cadbury’s being just two of many over the past two years.

It’s time that we had politicians with experience of the real world of business and manufacturing in power, rather than a stream of graduates going from university, to research, to political activism and then on to parliament without any experience of the real world.

Manufacturing and Engineering seem to have become “second rate” activities in modern Britain, and until we recognise their importance to our economy provide the climate for them to grow we are condemned to be a high unemployment, low growth second rate economy. 

Steel workers’ union Community has asked the Environment Agency to hold in trust the carbon credits accrued by Corus’s doomed plant in Redcar until production resumes.

Corus is mothballing its historic steel making operation in Teesside, which threatens the livelihoods of 1,600 workers in one of the country’s worst unemployment blackspots.

The closure has led to concerns that Corus, owned by Indian billionaire Ratan Tata’s business empire, may seek to trade the carbon credits that were freely allocated to the plant.

The union’s general secretary Michael J Leahy said holding the green allowances in trust would be a ‘responsible act’ that would reassure the Teesside community.

He added: ‘I am calling upon the government to take action to ensure that Tata Corus do not profit through their destruction of the Teesside community.’

A Corus spokesman declined to comment.

Above Report from This is Money

Corus looks set to receive at least £250m in carbon credits over the next three years, at the same time as they are building new plants in India. The credits come from removing existing carbon emissions within from current plants. Assuming that the carbon credits were designed to reduce global emissions I cannot understand how closing a plant in the UK and building new plants in India will reduce overall climatic carbon emissions.

Furthermore, I assume if the plant does not close then Corus will not gain the credits. This would be a barrier to selling the plant to other interested parties, as it appears that Corus would benefit more financially by closing the plant than by selling it. Furthermore closing the plant removes the possibility of future competition.

When Tata purchased Corus, it was argued that they paid too higher price at the time. Considering that they got the Corus order book, a distribution network, an entry in to the European market maybe the “end game” will prove it to be a bargain.

Is it not time that the European union and the UK in particular made it a little less attractive to export jobs and contribute to the destruction of our manufacturing base?

More on this subject.

Corus, the steelmaker, was accused on Wednesday of not wanting to sell its Teesside Cast Products plant for competitive reasons.

With jobs of 1,600 at TCP on the line only hours before mothballing starts on Friday, Ray Mallon, Middlesbrough’s elected mayor, claimed a credible consortium interested in buying the plant had received no response from Corus to a request to “look at the books” and to allow due diligence.

Unite, the trades union, attacked mothballing as a “disgraceful charade” and a “smoke screen” to give the impression Corus, owned by Tata Steel of India, wanted to sell TCP once it had interested buyers.

Spotted in the FT this morning in a report by Chris Tighe go here for the full story. There are several reports this morning of “credible” approaches regarding the Teeside plant. If these are genuine it casts serious doubt on Tata’s real motivation for the closure.

First quarter flat product business is virtually finished now and spot prices for stripmill products have moved up in many instances. They are expected to rise further in period two if the mills’ initiatives prove successful. Most producers have not quantified their proposals so far. Although stocks are low throughout the supply chain, end-user consumption has failed to recover. Consequently, buyers are very cautious. Distributors, in particular, question whether they will be able to recoup the increases from their customers.
In Germany, supplies for the remainder of the first quarter are quite limited and basis numbers have been pushed up as a result. Buyers are in discussions for the second trimester and anticipate hikes of anything from €50 to €100 per tonne. The mills argue that raw material costs are escalating. Currently, they have relatively good order books from the auto sector and from service centres whose empty stocks need replenishing. The fear is that the benefits from government incentives have already accrued and that sales will reduce during period two, causing downward price pressure.
French consumption has strengthened slightly but some market participants point out that it varies significantly depending on sector. Sales to the carmakers remain good, for now. Producers are claiming increases for April/June, while spot prices have already started to rise. The quarterly deals should be finalised by the start of March. Delivery lead times are extending. However, distributors complain of poor end-user demand, fearing they will be unable to pass on the hikes implemented by the steelmakers.
Activity is only a little better in Italy but market confidence is improving. However, a lack of final consumption still poses a major problem. Moreover, tightening credit lines are not allowing business to flourish. Service centres are fighting for orders, thus forcing down resale values. They worry that consumers will not be willing to pay the higher prices demanded by the mills.
The level of activity in the UK is not encouraging. Real demand remains subdued although a degree of restocking has taken place. No substantial improvement is likely for some time to come. Prices have moved up through January/February and suppliers have started to indicate their intentions for second quarter business. However, as the increases are purely cost driven, success is not guaranteed. Independent distributors claim that resale values from Corus-owned service centres are depressing the market and that, as mill prices climb, their profit margins will be squeezed even tighter. Any recovery looks fragile.
Belgian consumption, which was already low, has been further damaged by the harsh winter weather. The steelmakers are endeavouring to talk values up but are finding it hard to make sales. Service centres believe that producers are pushing material through their own tied outlets at very cheap prices. Certainly, their resale values are not moving inline with the mill hikes.
In Spain, suppliers claim that rising raw material expenditure is the catalyst behind their proposed price advances. However, distributors and end-users consider the size of their demands to be excessive in the present economic climate. Service centres are currently selling extremely cheaply - well below replacement costs in many instances. Even though stocks are now in balance with the much reduced consumption, this will create problems for the mills when trying to implement more increases.

Article by MEPS

The Teesside Cast Products Plant (TCP) run by Corus, which is owned by Indian conglomerate Tata, will finally be mothballed on Friday - three weeks after the Redcar site was initially planned to shut down.

Local Labour MP Vera Baird said the rising price of steel could give the town’s major employer a future, and she hoped it could swiftly reopen if a buyer was found.

Workers were told on Monday that Friday would be the last day of steel production.

The plant was due to close last month but Corus announced it would carry on working for some more weeks, while raw materials were used up.

The plant had run into trouble early last year after a consortium of buyers, which had committed to buy nearly 80 per cent of the Teesside plant output, terminated the contract.

The owners Tata, have always maintained that lack of demand is the main reason for closure, although ironically they are planning to double steel production in India over the next three years as well as building a new plant in the Netherlands funded by European tax payers.

A further twist in the story, is that not only could Tata benefit in a saving on “carbon allowances” to the tune of £600M over the next three years, but India could gain by selling carbon allowances back to Europe under the carbon trading scheme. The net effect on carbon emissions will be absolutely minimal with steel production simply moving, and not reducing.

Recent history has shown that in the steel industry, selling plants to overseas owners always leads to job losses in the UK, exporting jobs tomorrow, for a “few bucks” today. It’s all part of the de-industrialisation of UK ltd. Successive Governments starting with Thatcher’s conservative government and continued by labour for years have sung from the same song sheet, proclaiming that the service industry is our future. How well they have served us!

British Prime Minister Gordon Brown has promised to talk to Tata Group chairman Ratan Tata as a last ditch effort to stop the Corus steel plants in Teeside from being shut down at the month end and thus save 1,700 jobs.

Brown gave the assurance to three MPs, Ashok Kumar, Solicitor General Vera Baird and Dar Taylor when they called on him at his home on the New Year’s eve.

Due to mounting losses last May Tata Steel Europe announced suspension of some of the facilities belonging to Corus’ Teesside Cast Products business in northeast England.

Ashok Kumar, who had worked with the British Steel for 14 years, said that many of his "constituents work at the Redcar plants in Teeside" and he was deeply attached to the threatened steel plants and employees whose jobs are at stake.

Baird, who is MP for Redcar where the plant is situated, said Brown had agreed to work behind the scenes to try to revive a deal with an international consortium to take over the plant by offering government help.

The collapse of the planned 10-year contract sparked the sudden announcement that the plant was to be mothballed, with Corus accusing the four firms of "walking away" from the deal.

Baird said Brown was "going to see if there is anyway to revive these purchasers by indicating through diplomatic channels that the government will help make that deal.

"Once he had something positive to suggest", she said, the Prime Minister had indicated that he would speak directly with Tata, the chairman of Corus’s parent company.

Baird, along with Kumar and Dari Taylor, warmly welcomed Brown’s promise of help but warned that time was running out to prevent the jobs being lost.

With existing contracts at an end, mothballing may happen this month unless a buyer is found, she said.

"I feel that we are leaving literally no stone unturned if we have the Prime Minister involved personally.

"Corus, which produces about 20 million tonnes of steel a year, accounts for more than two-thirds of Tata Steel’s production.

However, the global steel industry has been hit by a collapse in orders from the auto and construction sectors which have suffered during the economic downturn.

Corus has already cut about 6,000 jobs in Britain and the Netherlands since the start of 2009.

Although we have noted some minor downward corrections for flat products over the last month, market prices are starting to stabilise in most parts of the EU. The import threat from third country suppliers appears to have abated. The domestic mills would like to impose rises for the first quarter 2010 but the success of this initiative is not guaranteed as final consumption remains weak. Service centres are determined to keep their inventories down to match the reduction in demand. Inadequate credit insurance continues to be a major issue in many countries.

The UK market shows no improvement. If anything, consumption reduced during October/November but inventories are now at comfortable volumes. Companies are targeting to have as little stock as possible by the end of the year and, consequently, are unlikely to buy more unless the need is urgent. The distribution sector is particularly cut-throat at present, with many resale prices not based on replacement costs. There has been some downward correction on ex-mill basis values which is likely to continue into January and February due to the arrival of third country material, although the tonnages on order are not huge.

Read the full report here

I came across this rather enlightening article by Christopher Booker writing at the Telegraph.co.uk

The owners of Corus, Tata, have recently announced the closure of the Redcar steel plant, which will have a devastating effect on the workers and the economy of an already deprived area. Whilst the stated reason for the closure of the plant is a lack of demand for steel, the parent company is planning to double its steel production in India over the next three years as well as building a new plant in the Netherlands funded by European tax payers.

A further twist in the story, is that not only could Tata benefit in a saving on “carbon allowances” to the tune of £600M over the next three years, but India could gain by selling carbon allowances back to Europe under the carbon trading scheme. The net effect on carbon emissions will be absolutely minimal with steel production simply moving, and not reducing.

This would appear to be a financial model  to export jobs from Europe around the world, funded by Europe itself!

Please follow the link below and read the full article which makes fascinating if slightly disturbing reading. The number of comments by readers, which follow the article make for a good read in themselves.

What links the Copenhagen conference with the steelworks closing in Redcar? – Telegraph

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Steelmaker Corus has confirmed it will curtail production at its Teesside Cast Products factory, putting 1,700 people out of work.

It had been announced in May that the 150-year-old Redcar plant was to be mothballed.

The plant had been at risk since a 10-year deal suddenly fell through.

Business Secretary Lord Mandelson expressed his disappointment, saying it would be a "very difficult time for the workforce".

The deal that had fallen through was signed by an international consortium, led by Italian steel specialists Marcegaglia, in 2004, and committed the consortium to buy just under 78% of the Redcar plant’s production.

BBC North East business correspondent Ian Reeve said the factory would close by the end of January.

Corus said that 1,700 jobs would go, which is about 600 fewer than had been previously thought.

Full article at BBC News