Through the din of machinery and clouds of hissing steam, there is a rumbling sound. A slab of red-hot metal thunders along the line of rollers and water jets in the cavernous factory, to be transformed into a thin sheet before being rolled up tightly into a coil.
Steel produced at this sooty complex that sprawls along the south Wales coastline goes into everyday objects such as cars, dishwashers, coins and food tins. It is a source of local pride.
Workers and managers tell visitors how the hot strip mill, where slabs of steel made on the site are rolled, has recently broken production records. Productivity is up, they say, and a turnround plan on track. But there is a anxious look in their eyes. For they know their efforts may not be enough.
The twin blast furnaces towering over Port Talbot have become the focal point of a crisis that has left British steelmaking hanging in the balance. After years of heavy losses, the plant’s Indian owner, Tata Steel, wants to sell off its collection of UK facilities.
If no buyer is found by the end of June, they could close permanently. As well as the livelihoods of about 35,000 people at the business and in the supply chain, this threatens the core of an industry that has been a pillar of the British economy since the late 19th century.
“It’s the whole UK industry that’s in jeopardy if Port Talbot isn’t here,” says Barrie Evans, a steelworker of 21 years. “Everyone has their back to the wall but they’re coming out fighting.”
Although high production and energy costs have made Britain an expensive place for heavy manufacturing, the plight of Tata Steel UK has magnified distortions convulsing the wider global steel industry.
From the US to Australia and Brazil to Japan, producers have buckled after prices fell by nearly 30 per cent last year, according to the Platts World Steel Price index. At companies such as ArcelorMittal, US Steel and Nippon Steel & Sumitomo Metal, earnings have crumpled, share prices sagged and, in some cases, thousands of jobs lost in response to a slump triggered by a massive international oversupply.
On Wednesday Tata completed the sale of its European long products business, based at the UK’s other big steelworks in Scunthorpe, to Greybull Capital for £1.
As a highly cyclical industry, steel has long suffered bouts of excess production capacity, which drags down prices in downturns. But this time the equation is skewed by a very large variable: China.
“After the financial crisis, [the industry] came out of trouble first with the growth of China, which sucked in raw materials and then steel,” says Christopher Beauman, an industry adviser. “Because it became so big, when China sneezes, the rest of the world catches pneumonia. Its downturn has arguably hit steel more than any other sector.”
Source: FT