Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 20 - 32)



Mr Cunningham

  20. Do you think enough is being done to either prevent or stop dumping of steel in this country?
  (Mr Leahy) No, I do not. There is a difference in terms of the process that we have in Europe and in North America, for instance. The lead time to actually notify dumping and the procedures that have to be followed are too elongated and quite clearly put us at an extreme disadvantage in the UK in particular but in the rest of Europe as well.
  (Mr Shannon) If you compare ourselves with America in terms of their anti-dumping legislation, within a month of making a complaint you can almost block any material coming into the country. Both Michael and I are members of the ECSC, European Steel and Coal, and we know—this is where we support Corus from this end—if you lodge an anti-dumping suit it can take six months even to begin it. By the time those six months are over you have lost your market and the damage is done essentially. If you look at the American situation they are very, very good at protecting their home markets in that way.

  21. Have any representations ever been made to the Government about this?
  (Mr Shannon) Yes.
  (Mr Leahy) Yes.
  (Mr Shannon) We have done it jointly, the ECSC have done it. We are at one there with the producers in that sense in trying to speed the bureaucratic process internally.

  22. How has Government responded?
  (Mr Leahy) I think it is still an open question. The Steel Association, which will be giving evidence, has made some fairly forceful representations and I am sure they could give you their representations chapter and verse.

  23. What do you think of the European Commission's decision to request talks with the US regarding the 16 cases of the imposition of countervailing duties on European steel exports alleged to have benefited from government subsidies? What is your view about that?
  (Mr Walsh) It is a matter of extreme concern. The latest development has been that new legislation, initially about farming, has been introduced in the United States which will require that levies collected as a result of anti-dumping cases are paid directly to the steel companies in the United States. This really invites a challenge at the World Trade Organisation and I sincerely hope that our Government will pursue it with the utmost speed.

  24. As we understand it, the USA is going to repay the countervailing duties imposed on British Steel, in other words they are going to pay back something. What do you feel about that?
  (Mr Walsh) The damage is done, the markets are lost for a time. There were 12 anti-dumping cases last year in cold rolled products against 12 different countries and the exports of those countries to the United States of steel products was halved last year and there is a continuing decline this year. Even though the cases were lost by the United States it had a very dramatic impact on the exports of steel from those countries to the United States.

  25. Whether there is a rebate or not British companies lose out because of the time factor?
  (Mr Walsh) That is right, yes.
  (Mr Shannon) It is a bit like the street trader who pays their fine. You work out the profit and loss and if you are earning £100 but losing £20 in fines then you are in £80 and it is a straight forward profit and loss situation. I think they look at the rebate and by the time it is paid and it is real money, effectively what you have gained is the long-term market.

  Chairman: We would be obliged if you could provide us with some more information on that, Mr Walsh.

Mr Cunningham

  26. Moving on to European enlargement, do you think that enough is being done by the DTI to ensure that Polish steel is restructured?
  (Mr Leahy) As you know, Corus is considering a considerable investment in Poland. We understand from the information we have that it intends purchasing a mill, or mills, that would produce long products in Poland. There is speculation about how much it will cost them. Some estimates go as much as £70 million. Although we were told it would only be small tens of millions of pounds, they are talking about £70 million. As I understand it, at Huta Katowice they will continue to produce steel plant and Danieli are interested in purchasing that. There will be an agreement, if there is a final agreement, for supplying steel and they will use the semi-finished products into the market. Corus tell us that will not have an impact on UK production. However, we are fearful of the fact that their philosophy is to get closer to the market of Europe which at the moment is quite significant, as I said 50 per cent is exported, 75 per cent in Europe. There is a gradual undermining of UK production. We believe it is strategically important for the Government to say it is in the economic interests of this country, and industrially manufacturing steel is at its core, to ensure that we maintain a reasonable level of production in the UK because if we do not then the steel industry is going to wither on the vine.
  (Mr Shannon) I think this goes back to the argument that has been used before of the level playing field. The labour costs in Poland are about one-third of those in the UK, plus there are sufficiently less social charges as well. Certainly my own union supports the enlargement of the market because I think it is absolutely essential for the future, but that has to be done on the basis of working towards a level playing field. If you simply bring in those large Polish steel workers currently with those labour costs, it is not just going to be the UK that would find it very difficult to compete, it is the rest of Europe as well. Where we would support the enlargement and use those arguments, it has to be done on the basis of working towards a level playing field so the UK steel workers can compete fairly.

  27. Has this cheaper Polish steel had a major effect in Europe?
  (Mr Shannon) I think that in Poland it certainly has but at the moment, because they are not members of the European Community, there are some disadvantages to how they actually position themselves. In some of their plants there are major environmental problems. Of course, there is the larger political argument that wants Poland in and we, while supporting that, do not want to see the UK industry be a casualty of that larger argument.
  (Mr Leahy) Corus would say that GDP has grown at six per cent in Poland, that most of the steel that is going to be produced would be for domestic consumption and, of course, they can attack markets particularly in Germany where German steel companies have attacked our markets. We believe in the long-term strategically they are taking a decision to actually invest in Europe at the expense of the UK and if we are not careful we will see this strategic industry wither on the vine.

  28. Going back to the workforce, do you think there is enough being done in the steel industry regarding training?
  (Mr Leahy) No. I notice the statistics that are quoted in terms of £65 million being spent on training. The problem here is what sort of training. A lot of that money is being spent on graduate education, it is not being spent on training the people that Bob and I represent. Specifically the training is on-the-job training. We believe that Corus and other steel manufacturers have a responsibility to give our members transferable skills. We have lost a large number of jobs over the last 20 years. We had in place the ISERBS benefit which cushioned retraining into other industries. The Conservative Government withdrew that unilaterally and there is no training available other than the SPT that ISTC introduced, the Steel Partnership Training, which has cost us about half a billion pounds over the last four years. We are training our members in skills that they can transfer into industries in the community. We believe that Corus in particular is abrogating its responsibility on that particular front. In short, we are very concerned about that particular issue.
  (Mr Shannon) I am sure everyone is aware that most of the steel industry is still concentrated in local communities that are overly dependent on that. It is not easy to transfer these skills. I have come today from the DTI where the AEEU is now launching a programme for real jobs within the industry, if it comes to that. We have to accept there will be some job losses out of the industry. It has a different effect. Because where it is localised in steel plants, it is not just the steel plant and the steel workers it affects, it runs on right into the local community in terms of the supporting businesses, so it has a larger impact than normal because of the large nature and numbers surrounding an integrated plant. We are hoping, and this is the first indication we have had, that Corus are now prepared to enter into a partnership and hopefully they will fulfil that with ourselves as a union and the DTI to actually produce and look at jobs in the new economy.

  29. Would you say that this has had an impact in relation to skills shortages in the industry, the lack of investment?
  (Mr Leahy) In terms of skills shortages, most of the production workers and, may I say, Bob's members as well come in from school and they are educated in the industry. For a long time we have said to the industry that they should be giving people not only education, because most of them who are now going to be declared potentially redundant are in their 50s, they left school at 15 and the only education they have had is in the industry, they should be educating these individuals far better and also they should be giving them transferable skills. I have to say that we have tried to persuade them to do that and up until now they have not faced up to their social responsibility. Whilst it is quite easy to declare people redundant I think they should be taking on board their social responsibilities in those steel communities where you already have high unemployment.

  30. What about apprentices? Are there any apprentices in the industry?
  (Mr Shannon) Yes, they are still taking on apprentices but that is dropping off. One of the real problems is either as an apprentice or as a graduate production worker you come into an industry that is perceived to be repositioning itself and if you are looking for a future in it, that itself starts to cut short your intake because individuals look at that and say "I am not likely to be working for this company in two years". If this plant is in the process of running down, if this industry is running down, then you have this self-fulfilling prophecy that keeps reinforcing itself. We are finding that effect, that apprentices are looking at the industry when they come to make a decision and saying that whereas before it would have been automatic or they would have considered that to be one of the prime industries they would go into, they are now having second thoughts. That reinforces the difficulties that companies have in attracting a skilled workforce.

  31. Earlier on somebody touched on the business about people being over 50. What is the actual age profile in the industry, roughly?
  (Mr Leahy) I have not got the exact statistics but I do not think it is any coincidence that 4,400 people have been earmarked for redundancy and that is about the level of people over 50.


  32. Just to come back on one point about imports. In the AEEU submission reference is made to the penetration of UK steel markets by imports. We have been visiting a number of car plants and talking to people about where their steel is sourced and things like that. Is this import penetration attributable only to price or are there other factors involved? We are talking here about international companies assembling cars in the UK who have different views on chains of supply. They do not necessarily require a Union Jack to be wrapped around everything. What is the position? Is it price? Is it the inclination of the companies? Are there problems?
  (Mr Shannon) In the first instance it would be price, they would look at that first of all. You then look to see the security of the supply. If you are looking, especially in terms of just-in-time, we have seen the effects recently in the fuel prices where you have had lots of just-in-time agreements and they are very, very vulnerable to short-term stoppages or interruptions in the supply chain. If you are looking as a customer, whether in the car industry or the construction industry, the first thing you look for is security of supply in terms of supplying your own customers. If that is brought into doubt you then start to doubt, if you like, the integrity of whether that is going to be supplied and you look to source elsewhere. We are seeing some evidence of that beginning to happen, some of the major companies are saying "if we are not going to have security of supply and an integrated plant within a reasonable distance of where we produce then we have got to look to see how we source it elsewhere". That is the point we are making, that the company's intention, whether it understands it or not, is having an adverse effect on its competitiveness.
  (Mr Leahy) We are not on a level playing field. We would support the Steel Association when they say that electricity prices are 40 per cent higher here than in Europe and 20 per cent of total costs are electricity prices. The fact is employment costs were 18 per cent and will probably drop to 16 per cent. So employment costs 16 per cent and overall energy costs 20 per cent. That gives you some idea of what is going on.

  Chairman: Thank you very much, gentlemen, I think that is very helpful. As I say, there are one or two points we would like you to supplement with written evidence and we would be very grateful to you for that. I do not think you should take umbrage at the fact that just as you finish two of my colleagues arrive. In my former capacity as a school teacher I think I could probably guarantee that I would get letters from their mothers explaining graphically why they did not arrive on time but I think you appreciate the vicissitudes of the weather. Thank you very much for coming and for the evidence you have given.

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