In the North East of England the Corus steel plant at Redcar is closing. I must declare an interest here, because by father in law was a steel worker and a Union Official at the Port Talbot steel works and I have met and admired many steel workers.
Steel came to Redcar because of the geography – coal and iron ore was readily available and deep water harbours were nearby. Now there are many places that make steel and although the raw materials comprise 75% of the manufacturing costs it seems that the plant at Redcar is uncompetitive because of high British labour costs with falling demand in the recession, at least that is the official line on the closure. I have doubts about this.
I am sure that the falling demand is part of the picture but perhaps it is not the whole part of the picture. It seems that in the United Kingdom we are too ready to let specialised high quality industries close down or be controlled from abroad. Steel is a case in point.
The plant’s owners will by the closure put 1600 people out of work. They say that they are open to credible offers for the plant but no one has made a credible offer. The government is making all the right noises but the relevant minister, Mr Mandelson is not doing much more than sitting on his hands.
Economists argue that if the plant was viable businesses would be queuing up to make offers, and the lack of offers is evidence of the plant’s lack of viability. Politicians claim that the plant cannot be directly subsidised because of European Union State Aid rules and that we cannot discriminate locally in favour of steel made in Britain because of international free trade rules.
Of course there is always some truth in these statements but there are some pretty big “buts”.
Businesses might be unwilling to make offers because the plant owners (that control a significant share of world steel production) prefer to mothball the plant to enhance their market monopoly rather than sell it to a competitor. This is pure speculation on my part but we have to bear in mind that it is easy to make huge amounts of money and risk free if you have a monopoly.
The high labour costs did not prevent the plant from making plenty of money in past years.
The European State Aid rules might be either circumvented or an exemption obtained; there have bee precedents for this.
Finally that bastion of free trade, the United States, has plenty of restrictions on foreign produced goods; the Buy American Act 2009 restricts the purchase of supplies that are not both made in the USA and that do not have 50% of the components made in the USA.
My solution would be radical and would be environmentally friendly. I would link the ability to buy steel in the UK for government projects and for government funded projects to environmental production standards and invest the money in Redcar to ensure the plant met them.
Investing in an environmentally friendly steel industry would cost us more but no more than the cost of maintaining 1600 souls and their families on unemployment benefit. It would also do plenty of good for the other seven billion souls who inhabit this planet.
Filed under: climate change, global warming | Tagged: Buy American Act, Peter Mandelson, redcar, redcar corus closure, steel industry |
Robert Kyriakides's Weblog 
It’s really saddened me to watched Question Time this week and this was a question close to the heart of the audience I think.
Everything was discussed about the closure and good points raised by all. Everything apart from the real reason for the closure were mentioned and channeled down that route.
The only thing that nobody, at all, discussed was the (real reason the plant is being closed) and the reason why nobody will bail it out is because TATA is making several hundred million Dollarssavings by shutting the plant down and cashing in their carbon credits.
They will make much more quick and easy money from the Carbon Cap and Trade opportunities than the plant could make in the medium term, this is the real reason for the closure, not that the plant is not competetive or the product too costly.
They will simply re-open in India, where it will provide jobs for the Indian company and they won’t be subject to the Carbon Taxes, anytime soon.
Nobody picked this up or discussed it, here is how the ‘Green Taxes’ are really working. Does it benefit the environment in any way, (No), they just move operations from A to B in order to cash in on the Carbon Credit Fraud.
We are paying for it with our livelyhoods and they pollute in our name if we use their product afterwards we will have paid double, the whole air of things stinks to high heaven.
The founder of the carbon trade bank and all of his hot air will be over the moon won’t he. There is a real Gory future ahead of us folks, so you had best get ready for it.
Excellent point. These carbon credits belong in the same dustbin as derivatives, swaps and other ways of getting poor people’s money into the hands of the wealthy, or do I exaggerate?
Robert
Not at all Robert, your on the money as they say, one thing is for sure as the world oil reserves start running out they will drop rather dramatically as many scientist predict, and the alternatives will then be so popular that they will be in such demand it could be staggering, those who are set up now will win out in the end, tha time I predict by what studdies I have done will start showing within the next decade, watch this film and see why I think they know where all the oil is today and why its demise will be sooner than later.