Blast Furnace Number 5 at the Port Talbot Corus Steel Plant South Wales
Last year saw the closure of steelworks in Redcar and Scunthorpe. Now the steelworks in Port Talbot, Wales—like the Scunthorpe works also owned by the Indian company Tata steel—is facing 750 job losses, about 20 per cent of its workforce. Though the steelworks produce different products—Scunthorpe is a “flat products works” specialising in sheets of steel for car bodies and washing machines, while Port Talbot specialises in “long products” like rails—both sets of job losses will be devastating for the workers concerned.
Port Talbot, like Scunthorpe, is steel town. (Notwithstanding its claim to fame in producing three world class actors: Richard Burton, Anthony Hopkins and Michael Sheen.) Economically it is totally dependent on the steelworks. That’s why the loss of 750 jobs will hit so hard. Those jobs, paying good wages, are difficult to replace in a town than knows little else. It is, in a sense, a microcosm of what has become known as the “Welsh problem.” Half a century ago there were 100,000 coalminers in Wales and 75,000 steelworkers; now there are only 1,000 coalminers and 7,500 steelworkers.
Finding replacement jobs on that scale has been an uphill task for successive governments. And it may yet get worse: everyone is wondering whether the Port Talbot works will survive at all if China’s steel surplus continues. As China’s economy has started to slow down its oil prices have fallen dramatically.—but far less notice has been taken of the global collapse in steel prices. We use “hot rolled coil” as a marker price for steel, and its price has plummeted from £600 to £300 per tonne.
Port Talbot is our country’s biggest steelworks and can produce 4.5 million tonnes per year. Some readers may have seen the grainy black and white Movietone News images of Hugh Gaitskell, then Chancellor, officially opening the redeveloped works in 1951. Back then it was a triumph of post-war regeneration.
But the works should have had a warning sign outside: “Rest on your laurels and you will soon get overtaken.” Yes, it produces 4.5 million tonnes annually, but outside the UK seven million tonnes is now normal. Altogether Britain only produces 10 million tonnes per year; China produces 850 million. Being “the biggest steelworks in Britain” means very little today. The UK steel industry has become marginal in world terms.
It’s not all doom and gloom, though. Port Talbot is one of a tiny handful of steelworks in the world with a huge reserve of valuable “coking coal,” which has very few impurities. The town's Margam project, which would see the creation of a new mine designed to process huge amounts of the resource, is not off the ground at present, but the reserves of coking coal are certainly there to exploit. Few other major European steelworks hold the same advantage.
Forty 40 miles east of Port Talbot in Newport, another Indian-owned steel company, Liberty Steel is reopening a mothballed steelworks. The timing may seem strange but the Gupta family who own Liberty seem confident about the future.
Given this, could Tata have saved Port Talbot? Well, they could have shut Scunthrope’s steelworks down, installed a “bloomcaster” in Port Talbot (a device which takes molten steel and shapes it into "long products"), opened the Magram mine and built a new mill. It could have concentrated all its resources on Port Talbot. But that would cost billions of pounds, so was never going to happen.
That’s why Tata is going down the route it is. It will sell Scunthorpe’s steelworks for next to nothing to Greybull Capital—a distressed assets turnaround specialist. Tata will then have no “long products”, and will own only the assets in the two remaining mills: lJmuiden in Holland and Port Talbot. The plan is to “hang in there” until the market turns up. This is sometimes known as the “last man standing” strategy: Tata hopes to take a larger share of the market if it can outlive its competitors.
So, that’s why 750 jobs are to be cut—and why the governments in Wales and Westminster are being asked to help. I hope they give it. Fifty years ago there were 16,000 people working in Port Talbot and 3000 in the House of Commons. Soon there will be 3000 in Port Talbot and 16,000 in the Palace of Westminster.
