BRITISH STEEL

In The Ponzi Class, I wrote:

‘The demise of British Steel is a sad testimony to the disaster of the takeover culture stemming from the City and successive British governments. British Steel was making good profits and was investing in new production methods. By contrast several European steel producers were dependent upon government subsidies and those governments were reluctant to reduce surplus capacity. The subsidies enabled those less efficient producers to undercut British Steel. Even so, by 1997 British Steel was the second largest producer in Europe with an output of 17million tonnes – only 0.5million tonnes less than Germany’s Thyssen Krupp.

In 1999, British Steel merged with the Dutch company Hoogovens to form the largest producing steel company, now called Corus, in Europe and the third largest in the world (behind POSCO of South Korea and Nippon Steel). The merger was a disaster with falling output and increasing losses. Despite the merger, the Dutch part of Corus had maintained its own supervisory board which vetoed decisions, demanded extra investment for the Dutch side of the business, and was accused by the British unions of trying to preserve Dutch jobs at the expense of British ones.

Corus was taken over by Tata Steel in 2007. Half the cost of the takeover was a loan secured against the assets of Corus. The capacity of 18.2million tonnes that Tata took over from Corus is a small part of the 120million tonnes that Tata aims to have worldwide by 2015. That the plight of Britain’s steel industry was of minor concern to Tata and of little concern to the Tory Government was shown by the demise of the Redcar steel plant, which had been sold by Tata to the Thai firm SSI in 2011. As a result of a number of factors, including electricity costs on average 82% higher than EU competitors, not least due to climate change levies, other green costs, the inclusion of plant and machinery in business rates, and the fact that China had been dumping surplus steel production onto the European market, led to the permanent closure of the Redcar plant in October 2015.

The steel industry’s energy costs were so high because in order to comply with the Climate Change Act, which Britain unilaterally adopted, Britain must reduce the use of carbon-based energy and, due to the ‘carbon price floor’, cannot cut the price of carbon-based energy even if its costs fall – as they have. Consequently, along with the dash for unreliable and expensive green energy, accompanied by the closure of cheap electricity from coal-fired power stations, the energy costs for Britain’s heavy industries is roughly twice that of other European countries such as France and Germany (which is currently building a number of new coal-fired power stations). Consequently, British industry cannot compete. The new nuclear power station at Hinkley will only make matters worse. The cost of the agreed ‘strike price’ of Hinkley’s output is roughly twice the current wholesale cost of electricity, and this price is further index-linked to inflation for the next 35 years. Furthermore, Hinkley’s 3,200 Megawatts of capacity will cost as much to build as 50,000 Megawatts of gas power station capacity.

The Tories did not allow the fact that China was a communist state and therefore able to fix the costs of its steel production, nor the fact that other countries are supporting their steel industries, to interfere with their commitment to globalization. Chinese steel producers are heavily subsidized and are dumping surplus production onto world markets at less than their own cost of production. Chinese surplus capacity was 340million tonnes in 2014, which is more than double the demand for steel in the entire EU.

The numbers employed in the steel industry has collapsed from 200,000 in the 1970s to less than 20,000 in 2015. Other steel plants, especially the Tata owned one at Scunthorpe, were also under threat of closure. The steel firm, Caparo, went into administration. Of the Redcar plant, Alexander Temerko, deputy chairman of the oil rig maker OGN and a major customer, said: ‘The closure of SSI’s Redcar plant is a damning indictment of the Government’s ineptitude when it comes to supporting UK heavy industry. A business like ours can use more than 100,000 tons of steel per year, but the opportunities for synergy and collaboration have been wasted by successive energy ministers, who have turned their backs on UK oil and gas suppliers, pointing to EU regulations and claiming their hands are tied’. It was only after the closure of the Redcar pant that the Tory Government finally asked the EU for permission to assist the British steel industry meet the unnecessarily high energy costs. Other European countries have been willing and able to assist their own steel industries without EU obstruction. The Tories are simply using the EU as a cover for their true agenda, which is their policy of unilateral free trade and globalization. Gary Klesch, who had withdrawn from a deal to buy the Scunthorpe plant in the summer of 2015, said that Scunthorpe’s 6,000 workers were ‘being led to the slaughterhouse’ by politicians.

The Tory Government was somewhat embarrassed when it was revealed, just after the Redcar plant had closed, that the Ministry of Defence had entered into a £3.8billion deal to use Swedish steel for an order for 589 Ajax armoured vehicles and three naval offshore patrol ships. Once again the British government put unilateral free trade theories ahead of the national interest and the livelihoods of ordinary people. That the British war effort at the outbreak of WWII was crippled by the inability to produce or buy the required amount of steel needs to be remembered, and that it was only US Lend-Lease that bailed Britain out.’

The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, page 274.