Select Committee on Welsh Affairs Minutes of Evidence

Memorandum submitted by Corus Group PLC


  1.  The locations of the principal Corus businesses which manufacture and process steel in Wales are shown in Figure 1 below.

Figure 1 Location of Manufacturing Plant in Wales

  The main concentration of employment is at Port Talbot, Newport, Llanelli, Ebbw Vale and Shotton.

  2.  The processing works can be broadly divided into six groups.

    —  Integrated works at Port Talbot and Llanwern producing iron and steel as well as hot rolled, cold rolled and coated products. These works provide the feedstock for the other processing lines in Wales.

    —  Coating lines producing metallic and pre-painted coils at Shotton, Bryngwyn, Tafarnaubach and Pontardulais.

    —  Tinplate works at Trostre and Ebbw Vale.

    —  Specialised Strip lines producing electrical steels and special narrow strip located at Orb works and Whitehead works both at Newport.

    —  Construction Products works supplying a range of profiled sheets, lintels, framing, crash barriers for the construction industry. The main businesses are located at Newport, Caerphilly and Ammanford.

    —  Services Centres at Caldicot, Newport and Risca.

  Figure 2 shows the main processes and Annex 1 summarises the processes at each works. A glossary of technical terms is given in Annex 2.


  1.  The key factor behind the poor financial performance of the Group's UK carbon steel assets has been the lack of growth in UK demand, particularly for flat products. As a consequence, through the 1990s as the efficiency of the assets employed improved, an increasing proportion of UK basic flat products had to be exported. High transportation costs and aggressive price competition in export markets have more than offset the benefits of the ongoing cost and efficiency improvement measures achieved by Corus' UK workforce. This adverse situation has been dramatically worsened by the weakness of the Euro and as a result very significant losses have been incurred. Against this background, the announcement on 1 February outlined a reduction of 3 million tonnes of iron and steelmaking, together with the closure/reconfiguration of certain mills and processing lines in Wales as follows:

    —  Llanwern: the closure of iron and steelmaking operations; the closure of the annealing and tempering facilities; and a reduction in activity levels at the hot strip mill and cold mill operations.

    —  Ebbw Vale: site closure and relocation of a tinning line to Trostre.

    —  Shotton: the closure of the pickle line, cold mill and one electro-zinc line.

    —  Bryngwyn: site closure.

  In addition, the coil plate mill at Teesside will be closed and slabs from Teesside will be rolled on the Llanwern hot strip mill. The annealing and tempering facilities at Shotton and the pickle and galvanising lines at Port Talbot, which were mothballed in Autumn 2000, will also be closed.

  The above configuration changes will be completed during 2001, with the exception of the closure of Ebbw Vale that will be completed by mid-2002. Annex 1 also shows the processing lines that will close on each site.


  1.  Total number of people employed at the principal sites in Wales are summarised below:

SiteCurrent Direct
Employees at end
January 2000
1 February
Port Talbot3,229284 1002,845
Llanwern3,163398 1,4401,325
Trostre960+35 (2) 0995
Ebbw Vale1,059279 7800
Shotton1,16791 319757
Bryngwyn1347 127 0
Other Sites1,24822 491,177
Total10,9601,046 2,8157,099

  Notes: (1) Restructuring still to be implemented following previous annoncements.

(2) Transferred from Ebbw Vale to Trostre.

  From the above it can be seen that the principal reductions in employment will be at Llanwern and Ebbw Vale consistent with the projected configuration described above.

  2.  In addition to direct employees an estimate has been made of the number of contractors which could be affected by the announcement and this is shown below:
Port Talbot1,1001,100
Ebbw Vale1000
Other Sites6030


  1.  The key events are summarised below. There were a large number of meetings and events at which ministers, MPs, AMs, political advisors and senior officials in Whitehall and Cardiff were given briefings about the state of the company and the need for action. Not all are listed.

Oct—Dec 1999

Visits by Secretary of State for Trade & Industry, Rhodri Morgan MP to Llanwern Works and Alun Michael MP to Port Talbot. A presentation to each made highlighting the need for competitiveness for manufacturing industry emphasising:

—  the impact of the strength of sterling with an indication that the damage threatens to be permanent and could result in closure of otherwise viable businesses

—  the consequences of the proposed climate change levy which could result in significant risk of plant closures and job losses

January 2000

Half-year results for British Steel plc to October 1999 showed pre-tax loss of £167M due to "the continuing impact of severe pricing pressure in Europe exacerbated by the adverse of the strength of sterling". Previous results for British Steel plc showed the deterioration in profitability of carbon steel activities over the period since 1996/7. (See annex 3 for details).

April/May 2000

A number of briefings at Port Talbot, Llanwern and in the Assembly for Welsh AMs, Welsh MPs, No 10 Policy Unit, at which they were told plants were becoming "vulnerable".

June 2000

Six months results for Corus Group plc to April 2000 indicated continuing pre-tax losses of £113M. Within that, the carbon steel businesses made an operating loss of £204M, £198M of which was attributable to the UK. It was stated that "the serious erosion of the competitive position of the Group and its customer base in the UK as a result of the strength of the pound against the Euro, inevitably means that further difficult decisions will have to be taken in order to improve our competitive position. Accordingly the Board and the management are giving this area their urgent attention".

July 2000

Announced 1,300 manpower reductions within Strip Products and Tinplate businesses in Wales to improve their competitive position.

August 2000

Announced the start of contractual discussions with suppliers of material and services for the reline of No. 3 Blast Furnace at Llanwern. The programme was subject to an ongoing business viability review within Corus to ensure that it continues to be in the overall interests of the Company. Against the prevailing economic background it was stated that Llanwern Works in particular must achieve a more competitive cost base in order to maintain the current plant configuration in the future.

September 2000

Financial results for Corus Group plc for the nine months to July 2000 showed a loss of £165M before tax. An operating loss of £301M was reported for carbon steel activities, "in spite of a profit contribution from Hoogovens". Again it was emphasised that "the trading situation for carbon steels, particularly in the UK, is very difficult and accordingly the focus of management has been directed towards efficiency improvements and cost reductions".

October 2000

A cost reduction programme for the Group's Strip businesses launched and the cessation of activities on certain production units and reduced shift levels on others was announced. This included the mothballing of Llanwern No.2 blast furnace, Port Talbot HDG line and one pickle line, Shotton anneal & temper line and Bryngwyn No.1 paint line. The announcement again highlighted the effects of a particularly adverse business climate and worsening market conditions.

Sept-Dec 2000

The downward pressure on prices continues and significant increase in imports into the UK. The import share for strip products was 49% in 1999 compared to 41% in 1997. During this period, political briefings continued at Secretary of State level and to MPs, AMs and officials, taking place in London, Scunthorpe, Cardiff, Llanwern and Port Talbot. All emphasised the vulnerability of plants to the continuing market difficulties, exacerbated by the strength of Sterling.

December 2000

The resignation of the Corus Joint Chief Executives was announced and at the same time the Chairman made the statement that "whilst the aluminium and stainless steel business are making good progress the carbon steel business continues to struggle particularly in the UK where market demand remains relatively weak. Demand in the rest of Europe is strong but over-supply is now beginning to cause a weakening in prices throughout the EU. In the light of the market outlook and the continuing strength of sterling against the Euro, it is inevitable that further major restructuring will have to take place in the UK".

31 January 2001

Internal Corus configuration review completed.

1 February 2001

Announced restructuring.


  1.  Specialist help and guidance will be available from the Employment Service who will locate themselves on site to help people find alternative employment and/or re-train to improve their skills and future prospects for employment. Rapid Response Units are being established to deal with the job losses in a co-ordinated manner.

  2.  In addition, UK Steel Enterprise (formerly BS Industry) will be working closely with each of the Task Forces as well as the National Assembly and the Welsh Development Agency to identify and assist with those initiatives most effective in helping to regenerate steel areas. Additional resources will be made available to assist the start up and growth of key job creating enterprises and to help pump prime other regeneration and job creation initiatives in these areas.


  1.  The announced restructuring of the business—aligning operational capacity to the UK market size, minimising unprofitable exports and improving manufacturing efficiency—will lead to improved financial performance. The long-term viability at the remaining works will ultimately be determined by market conditions.

  2.  The fundamental driver behind the need for restructuring is the continuing erosion of the UK industrial base and the increased competition in European markets exacerbated by the weakness of the Euro. Additionally manufacturing in the UK is being further disadvantaged by high energy prices, climate change levy, transportation costs, high business rates, as summarised below:

    —  Electricity prices paid by steel producers have fallen, but at end-January 2001 prices remain up to 30 per cent higher than for our European competitors and Government attempts to do something about it have been delayed excessively.

    —  Meanwhile, gas prices have doubled in the last 10 months and spot prices have doubled again in the last few weeks.

    —  The Climate Change Levy will cost UK steelmakers £10 million a year, a charge on their bottom-line, completely unrelated to financial performance or ability to pay.

    —  UK steel producers will be amongst the three most heavily taxed steel industries in Europe, along with the Italians. The vast majority of steel producers will pay far less, not to mention the producers of 40 per cent of world steel who are based in countries that are not Kyoto signatories and therefore will have nothing to pay.

    —  Transport charges are excessive with vehicle excise duty and fuel taxes adding £10 million p.a. to the disadvantage UK has compared with its continental neighbours, through the current non-use of 44t lorries. On rail, track access charges are excessive. Even port charges disadvantage the UK against continental competitors.

  3.  Corus Chairman, Sir Brian Moffat, told the Commons Trade and Industry Committee on 14 February that the company was aiming for a size that was competitive and commensurate with the UK market in the foreseeable future. Unfortunately, the company cannot guarantee the future. The market and the competitive performance of the plants will determine that.

Sir Brian Moffat

Chairman and Chief Executive

26 February 2001

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