Port Talbot – heart of the storm battering Britain's steel industry
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Version 0 of 1. “Politicians keep saying they hear our plight, somehow I don’t see them up for the fight.” These are lines of a poem written by a steelworker at Port Talbot as the board of Tata Steel met to discuss the plant’s fate. The poem was sent to Stephen Kinnock, the Labour MP, who is campaigning to save the Welsh site. The steelworks has been at the heart of the local community since 1901. It employs roughly 4,000 people and produces every Heinz food tin sold in the UK, every roof of a Nissan Juke car and every new 1p and 2p coin. However, as the UK’s largest steelworks, Port Talbot is at the heart of the storm battering the steel industry. At its peak at the end of the 1960s and start of the 1970s, the plant employed about 20,000 people. However, like the rest of the UK steel industry, it has gradually shrunk. Production of crude steel in the UK fell to the lowest level since the 1930s in 2011. After a fragile recovery since then, the steel industry is now under renewed pressure from a powerful collection of factors. Demand for steel has never recovered since the financial crisis in 2008. As a result, steelworks across the world are estimated to have the capacity to produce 300 million tones more steel than is being used. Imports of Chinese steel into Europe have more than doubled in the last two years as companies have desperately tried to make up for a slowdown in domestic demand by selling steel abroad. The increase in Chinese exports, coupled with slow demand, has helped to send the price of steel down by half since 2011 in Europe. At the same time, energy costs have gone up for steel producers. The Port Talbot plant uses as much electricity as the nearby city of Swansea, which demonstrates why fluctuations in energy prices can have a major impact. The key steel plants in the UK also need to be modernised. Tata has invested £350m in its Welsh operations in the last five years, including £200m for a new blast furnace at Port Talbot. However, it is thought to require another £500m to build new stripping and rolling mills. The squeeze on steel has already led to the collapse of the plant at Redcar in Teeside, as well as thousands of job losses, including at other Tata plants. Tata is pressing ahead with the sale of its business in Scunthorpe to Greybull Capital, an investment firm. Until late last year, the focus of Tata had been on Scunthorpe and its long products division, which includes steel beams and columns. However, with the pressure on the industry showing no signs of easing, the focus has now switched to Tata’s strip products business, which includes Port Talbot and makes a wide range of steel designs. Port Talbot is understood to be losing more than £1m a day. One industry source said: “It is clear that strip products is now making a bigger loss than long products ever was.” Tata Steel took control of Port Talbot in 2007 when it bought Corus, previously known as British Steel, for £6.2bn. The company employs roughly 80,000 people across five continents. It could never have imagined that less than ten years after it bought Corus it would have faced such a crisis. The turnaround plan for Port Talbot and the strip products division involves cutting around £350m of costs and focusing on high-end products for key industries such as automotive, engineering and consumer goods. However, a key backer of the plan, Karl Koehler, chief executive of Tata Steel Europe, announced he was leaving the company last month. In order for the plan to work, Tata needs to pump more investment into its UK operations. The company says it has already invested £1.5bn since buying Corus, but this has been outweighed by the £2bn impairment charges on its UK operations as the losses have racked up. As a result, Tata is under pressure in India to pull out of the UK and focus on its domestic steel business, which is benefitting from the introduction of tariffs against Chinese steel – a move the Conservative government is reluctant to follow. |