UK Steel Industry

Andy McDonald Excerpts

Wednesday 15th July 2015 Westminster Hall

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I beg to move,

That this House has considered the future of the UK steel industry.

I am grateful for the opportunity to introduce this important debate, and I am grateful to hon. Members for attending. I welcome the Minister to her new role. She has already surpassed her predecessor, the right hon. Member for West Suffolk (Matthew Hancock), by attending this debate. She should not worry because I will be positive and compliment her, and hopefully she will compliment the all-party group on steel and metal-related industries by providing good answers to our questions.

The steel industry is a vital strategic foundation for the UK. Steel is fundamental to strategic sectors such as automotive, construction and energy. Being infinitely recyclable, steel is perfectly suited to sustainability. Like those of many hon. Members here, my constituency has a great and proud history rooted in the production of steel and associated products, and I hope that steel will play a strong role in the future of my area and my country.

The manufacturing of steel products makes a significant contribution to the British economy. Exports of British steel were worth £4.9 billion in 2013 and contributed £2.4 billion to the UK’s balance of trade. The sector’s overall contribution to the UK economy is worth some £9.5 billion a year. It underpins many other economic activities and will continue to do so for the foreseeable future. The industry provides jobs for thousands of people and supports domestic businesses and employment in the supply chain, with associated knock-on benefits for the national economy generated by tax revenues.

During the previous Parliament, the Government said that they would take swift and robust action by introducing compensation payments in relation to the EU emissions trading scheme in 2013, carbon price support in 2014 and making a commitment to commence payments in relation to renewables levies later this year and next year, but the industry faces a number of urgent and critical challenges today if it is to succeed tomorrow. The need for major ongoing investment will continue, and a meaningful partnership between the industry and the Government is required to overcome those challenges.

The changing nature of the economy means that the UK now imports more of the steel it consumes, largely in the shape of finished goods. In 1970, 90% of the steel consumed in the UK came from domestic production; that share is now less than 20%, with consumption broadly the same. That has compelled the UK metals sector to become increasingly export focused, which exposes us to shifting wider demand patterns and movement in exchange risks, as we have seen recently. Meanwhile, the UK remains open to imported steel material from as far away as China.

The UK steel sector continues to suffer an ongoing economic crisis. The service sector-led economic recovery has left steel-consuming sectors, such as construction, between 5% and 10% below 2007 levels; and recovering activity in such sectors has been less steel-intensive. UK steel demand in 2015 is forecast to be 75% of pre-recession levels, compared with 94% in Germany and 180% in China. Such demand levels are a real problem for a capital-intensive business such as steel.

High levels of steel imports are another challenge faced by the industry. Members of the APPG, of which I am chair, are increasingly concerned about the dramatic increase in UK steel imports, most notably from China. Steel imports from China have doubled in the first four months of 2015 compared with the same period last year.

[Andy McDonald (Middlesbrough) (Lab)]

Does my hon. Friend agree that the Government should adopt the charter for sustainable British steel and bring that standard into their procurement practices? That would help to tackle some of the import problems that he outlines.

[Tom Blenkinsop]

My hon. Friend makes an excellent point, which both the APPG and EEF, the manufacturers’ organisation, have been making for some time. I hope the Minister will respond on that.

Compared with the same period last year, some products are registering truly staggering increases in imports of between 1,000% and 3,000%. The primary cause of those increases is the slowdown in Chinese construction activity, which has prompted certain Chinese producers to seek new markets in which to dump excess production. Those producers have come to the UK because they are already accredited under the British accreditation scheme to sell in far eastern markets such as Hong Kong and Singapore, which use the same accreditation scheme.

The APPG is committed to free trade, but what we are currently experiencing with some steel products cannot be considered free trade. The Government need to take a more proactive approach in such cases—some would say that they need to adopt industrial activism—and I welcome the news that, in last week’s European Commission anti-dumping committee, the Government voted in favour of maintaining anti-dumping duties on wire rod. The Minister heard my colleagues on that issue and took action. In a short period of time, she has been an infinitely better Minister than her predecessor. I will keep praising her in the hope that we get even better answers as the debate continues.

Loss of sales of the magnitude we are seeing now is unsustainable in the longer term for the one remaining British producer of rebar, Celsa, which is based in the constituency of my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty). The argument is not about creating barriers but about ensuring a level playing field not only in this case but in future anti-dumping cases, such as those on reinforcing steel bar, grain-oriented electrical steels and cold-rolled steels, which are all at various stages of investigation by the European Commission anti-dumping committee.

The steel industry is not all doom and gloom. An industry that remains innovative in which people continue to invest will create direct jobs, skills and broader regional economic growth. The steel industry has the potential to enjoy a long, sustainable, innovative and productive future. Earlier this month, for example, BOC, the biggest industrial gas company in the UK, signed a 15-year agreement to supply industrial gases to Sahaviriya Steel Industries UK, a major integrated iron and steel manufacturing facility based on Teesside in the constituency of my hon. Friend the Member for Redcar (Anna Turley) at the Teesside Cast Products site. The agreement is one of the largest gas contracts ever awarded in the UK. There has since been a turnaround, and the agreement represents a huge vote of confidence in the long-term sustainability of steelmaking on Teesside and the wider UK.

Another example, again from Teesside, is the cluster of energy-intensive industries in the Tees valley that recently set out a bold plan for the UK to lead the world in combining a growing industrial base with substantial reductions in carbon emissions. What is planned will be Europe’s first industrial carbon capture and storage network. CCS is a group of proven technologies that can capture, transport and permanently store up to 90% of carbon dioxide emissions produced by burning fossil fuels, thereby preventing them from entering the atmosphere. To date, the focus in the UK has been on commercialising CCS for electricity generation. Teesside Collective is an important departure; its premise is that a range of industries will be able to capture their emissions, plug them into a shared pipeline network and send them for permanent storage under the North sea. CCS is significant for the steel industry, as an energy-intensive industry, because the EU emissions trading system is likely to remain the primary driver of reducing industrial emissions up to 2030. Following the agreement of a new EU climate change package in 2014, sectors within the EU ETS will collectively need to reduce emissions by 43% between 2005 and 2030. Such reductions may be hard to achieve for sectors such a steel, but that type of programme offers a high-tech solution.

Projects such as the Teesside Collective may be crucial for the long-term future of the steel industry, and I welcome the support that the project has received from the Department of Energy and Climate Change. It is vital that the Government are proactive in supporting the steel industry. Such support does not have to consist of intervention similar to that in Italy, where the largest steelworks is in the process of being nationalised—incidentally, it is one of the worst-polluting steelworks in the EU. Government support could take the form of policies such as competitive energy prices and business rates. Following the review that ended in June, a swift, positive response is now required.

--- Later in debate ---

[Anna Soubry]

I am sorry about that. I will happily take interventions, but the hon. Member for Middlesbrough South and East Cleveland will want to sum up in any event.

[Andy McDonald]

I do not know whether the Minister intends to cover this point, but I will ask her now: should the UK Government follow the lead of the Welsh Assembly by endorsing the charter for sustainable steel?

[Anna Soubry]

The short answer is that I need to make more inquiries about that issue, and of course I will write to the hon. Gentleman about it.

Yesterday I met Karl Köhler, the chief executive officer of Tata Steel. It is absolutely clear that his company will face huge challenges in the future; he has been very up front about that, and I understand that. My attitude—which hopefully was demonstrated last week, as has already been identified—is that this Government will and must do all we can to help the sustainability of the steel industry.

That is why I was so keen that we vote as we did about the threat of certain Chinese imports of certain steel products where there is good evidence that—unfortunately —China has been dumping. It is right that the EU should take the measures we are taking. I was so keen that we vote in favour of those measures that when the vote from the UK delegate was cast in favour of what many will say is a protectionist measure, although I do not have a problem with it, apparently it was necessary to go back to make sure, because it was the first time that it had happened and people were so shocked by it. I hope that the message goes out to all involved in the steel industry that I take this matter incredibly seriously.

The steel industry is a very important part of our manufacturing sector, it is important to our country and we have to do everything we can for it. However, the challenges are enormous and we should be under no illusions about that, and of course it is not only Tata but all the other steel companies that face real difficulties.

I will return to my speech—in fact, I will start it, or rather jump into the middle of it. The best way that the Government can support UK steel companies is through a successful economy and successful steel-using industries. That is why I take the view that we should stick with the plan that we started under the last Government. We will continue with it. Our ambition is to create the right business environment for free enterprise and to remove barriers to productivity and growth within sectors, including by deregulation, promoting fair competition and simplifying the business landscape. The Government work closely with the steel industry on a large number of issues, and that will continue.