While Obama Fiddles, The West Burns
By Paul Homewood
From the Telegraph:
The owner of Britain’s biggest steelworks has reported losses more than doubling as it buckles in the face of high taxes and energy costs, the strong pound and cheap Chinese imports.
Tata Steel UK, which owns the giant Port Talbot and Scunthorpe plants, posted a pre-tax loss of £768m in the year to the end of March, up from a £354m loss last year.
The move deeper into the red was partly driven by the company – an offshoot of Indian conglomerate Tata – taking a £314m hit from restructuring and impairments. The company could face more charges this year, having cut 1,000 staff and agency jobs since July.
Revenues also fell, down 7.3pc to £4.2bn and production was down 300m tonnes to 8.2m tonnes, due to “operational issues” at plants.
Steel-making is an energy intensive process that needs 570 kilowatt hours of power to create a tonne of the metal
The poor performance is partly down to imports of cheap Chinese steel, according to a source close to the business. About half of the 1.6bn tonnes of steel made worldwide each year comes from China, which is now exporting about 100m tons a year as its economy slows.
In its annual accounts Tata Steel UK said that average revenue per tonne of steel it produced had fallen 6pc, because of “downward pressure on steel selling prices, caused primarily by lower raw material prices”.
Workers at Tata’s Llanwern plant, where 250 agency staff face losing their jobs
Britain’s steel industry faces a unique set of pressures, according Gareth Stace, director of trade association UK Steel. “It’s an unsustainable situation for the industry,” said Mr Stace.
“Chinese imports were 2pc of UK steel demand in the first half of 2011, that’s expected to be 8pc this year. Britain’s steel makers also face a strong pound, high energy costs, environmental levies and high business rates that foreign competitors don’t.
“The industry is not asking for a handout, just a level playing so it can compete,” he added.
A spokesman for Tata Steel UK said: “We continued to make good progress in areas under our control… but external factors are having an increasingly damaging effect on the European steel industry, including the UK’s. International steel prices are still well below the pre-crisis peak and EU demand growing at best modestly, the rise in steel imports into Europe is cause for great concern.”
He added that some countries are beginning to adopt a protectionist policies against imports, meaning even more steel could be pushed towards the “relatively unprotected” EU market.
This is a complex situation, and it would be wrong to blame any one particular set of circumstances. However, when I left the Steel Industry in 1990, British Steel was reckoned to be one of the most efficient steel producers in the world. Even then we were faced with subsidised competitors, particularly those with subsidised energy costs.
It is no surprise that the Chinese can undercut British costs on the basis of cheap labour. However, needlessly adding to our uncompetitiveness with ludicrous energy policies is really just hammering the nails into the coffin.
As a nation, we cannot live with an economy simply based on banks and burger bars. I feel sad.
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NOT A LOT OF PEOPLE KNOW THAT 
Sad, but I guess we’ll see more of this as India and China use cheaper energy sources and have cheaper labour.
I noticed the caption below the diagram which must be wrong.
570 kWh wouldn’t raise the temperature of a tonne of steel very far.
Also 570kWh is energy not power, but who knows the source of the picture and caption?
I have to comment…I’m retired from the American Steel Industry after 50 years. When I started it took us ~8.25 hours to make a ton of steel in Cleveland, buying power from our partner electric company in Pittsburgh. We were the most modern mill in the world, and we knew the Chinese people were lying about 2.5 hours of labor per ton of steel. That company is bankrupt long ago, just one of my disappeared pension incomes. When I did retire (I’ve made a good living), my last assignment was helping complete the largest mill in the world, in Oktibbeha County, MS, who make a ton of steel in <15 minutes (using very inexpensive nuclear power, forbidden now in America), and are quite profitable. This was a Russian-owned mill, who enjoys paying no US taxes, and gets paid to train employees to do something useful, since we no longer have an educational system to speak of…
Chinese people are not any more productive just because they have little fingers, and steel doesn't melt with any fewer kilowatts in China than in America. It has become unfashionable to go somewhere and work every day to produce something that was not there the day before. We now make our GDP from FIRE (Finance, Insurance, and Real Estate), which are immensely profitable, but unfortunately cannot exist without a manufacturing base. It's like extracting your heart from your non-productive body, and keeping it in nutrients. Yes, it is difficult to manage a prosperous country on an industry of sales clerks and hamburger vendors. Visit Detroit and walk around. Walk quickly 🙂
Did you ever compare the quality of US and Chinese steel and fabrication?
The long view of history is replete with great nations committing suicide due to rulers’ orders. China was the shining star of innovation with many technical advances back in the long-ago, but the rulers decided to close the borders, shutting down trade routes and destroying the innovative spirit. China was the poorest country on earth for many centuries as a result. It’s interesting to see the rulers of the US and Europe now repeating the pattern. Environmentalism is the new face of destruction for the common man/woman/child.
How We Know What Isn’t So…In some future edition, there will be a chapter on The Global Warming Panic
When my great grandparents were alive, iron was made in Pennsylvania using local materials in a stone furnace. The graveyard headstones of my grandparents remain – as do the artifacts of the closest furnace to their farm:
http://paironworks.rootsweb.ancestry.com/clahelen.html
“Helen” is pronounced “heal-in”
When I was young, steel mills in the Pittsburgh area using coke from nearby sourced coal was used. The “Valley” was a dirty deadly place (ex.: 1948 Donora smog).
https://en.wikipedia.org/wiki/1948_Donora_smog
Or see this photo:
link – Pittsburgh, 1940
The football team is still known as “the Steelers” – and other artifacts remain.
The UK is on the same path.
A kilowatt hour is a unit of energy, not power.
The irony is that many of the UK’s energy-intensive industries were actually quite energy-efficient. Sadly, their energy-cost overheads exceeded their energy-efficiency advantages, and so production was ‘exported’ to less efficient plants overseas. The net result is more energy used plus that of transporting the goods back to the UK.
I’m sure I read that Chinese is not only but also nasty – it is inferior due to impurities. Anyone care to comment? See http://www.telegraph.co.uk/finance/newsbysector/industry/11762086/Warning-Chinese-steel-imports-could-be-safety-threat.html
Japanese steel was also inferior at first when they started dumping it on the US market. Eventually though it became a quality competitive product. They had to when engineers and architects from other developed nations started rejecting it’s use unless it was certified.
Steel has a variety of properties, and is generally identified in the Black Book as various grades, indicating tensile strength, hardness, corrosion resistance, etc. and is really only distinguishable by laboratory test. This differentiates for instance Grade 5 bolts from Grade 2 bolts. The steel for making Grade 5 bolts is indistinguishable from the steel for Grade 2 bolts, but costs more money due to it’s chemical composition and manufacturing process. China habitually sells steel at the highest price, but has little interest in chemical compositions or workability. Thus 1181 steel from China looks very much like 1181 steel from America, and sells for the same premium price, but may be likely to fail if used in a demanding application. The Chinese will stamp their bars or paint their bars however they do in America. 🙂
I grew up in a family business selling steel and other metals and fabricating. Maybe most here don’t remember or weren’t old enough to know that we’ve been through this before with Japan. That is when back in the 70s most of the great mills in Pittsburgh, PA folded up as did most in Gary, IN as Japan dumped cheap steel into the US market. U.S. Steel, the largest, survived in a down sized mode but it led to the demise of Bethlehem Steel which had been the 2nd largest US producer. Many other Steel companies with long histories had to merge and diversify or sell out to foreign concerns in order to survive. The merging of J&L with Republic to form LTV being a prime example.
But China, unlike Japan, has it’s own natural resources to work with.
Yes, I was working for Jake and Louie when we bought Republic 🙂