Examination of Witnesses (Questions 33
MONDAY 6 NOVEMBER 2000
33. Good afternoon, gentlemen. We are very pleased
that so many of you are able to make it today. We realise one
of your number has been regrettably detained in Sheffield, Mr
Fletcher, as a consequence of the dangers of flooding to his plant.
We are grateful for the time you have taken because we realise
that for some of you there may be pressing problems of that kind.
Perhaps, Mr Siddall, you could introduce your colleagues and then
we will start.
(Mr Siddall) Thank you, Chairman. Good
afternoon. I would just like to thank you and your Committee for
inviting us here to give evidence this afternoon. My colleagues
do indeed represent all facets of steel production in the UK and
I would like to introduce them to you. My name is Peter Siddall.
I am President of the UK Steel Association and Chairman of a £40
million turnover family business employing some 400 people across
the UK. My company is the UK's largest purchaser of steel wire
and, indeed, we export wire products to the USA and to all over
Europe, but to Germany in particular. As you pointed out, Chairman,
I am sorry that David Fletcher, the Chief Executive of Forgemasters,
cannot be here today but as the River Don is six inches below
his electric melt shop at the moment you will perhaps excuse him.
On my left is Tony Pedder, who is Chairman of Avesta Sheffield,
the stainless steel maker, and a main board director of the Corus
Group, the UK's largest steel producing company. His company supplies
about 50 per cent of all the steel used in the UK and exports
similar quantities all over the world, but mostly to customers
based on Europe's mainland. On my immediate right is Tony Bagshawe,
who is President and Chief Executive of Niagara LaSalle UK, who
are specialist suppliers of mainly semi-finished and pre-formed
products to precision engineering companies, predominantly based
in the UK's manufacturing heartland in the Midlands. However,
exports, mostly to the USA and Europe, account for 25 per cent
of the turnover. The fourth member of our team, on my far right,
is David Rea, UK Steel Association's Secretary General. The Association
represents 95 per cent of all UK steel producers and most primary
processors, so he is well placed to cover questions about the
industry's relationships with Government both here in the UK and
in Brussels. Finally, Committee Members may also care to note
the differing ownerships of our three companies. We are variously
based: a UK company; a UK-Dutch combination and a UK subsidiary
of a USA based international group. Thank you.
34. Thank you very much indeed, Mr Siddall.
I think you appreciate that this inquiry was triggered off initially
by the Corus experience in the sense that there were a sizeable
number of redundancies and closures, or partial closures. We want
to try to get a picture of the industry in the round. I should
say at this point, Mr Pedder, that we may in fact invite you back
to deal with the specifics of your own business because we realise
that you are the biggest single player and it may be that it would
be unfair to the others to concentrate on the affairs of Corus
today. I am trying to get a sense of balance when one enterprise
is responsible for 50 per cent of output and has been the leading
one, as it were, in respect of the steel industry. It may be that
the other players have a different story to tell but this will
emerge. It may be that we will invite you back. Please, all of
you, in your respective roles, feel free to chip in. Perhaps you
could give us an indication, Mr Siddall and Mr Bagshawe, and,
indeed, Mr Rea, is it a single company that is restructuring,
that is confronting difficulties, or is it just a general malaise
related to the currency and other issues that are affecting the
steel industry in the UK?
(Mr Siddall) Just to answer that question first before
handing over to my colleagues, I would certainly say that it affects
all strata of the British steel industry, and indeed the downstream
producers as well. In contrast to Corus, I represent small family
businesses. Thirty per cent of the turnover of my group of companies
is exported. Indeed, particularly with the extreme strength of
the pound and various other factors, we are finding things very
tough indeed. In fact, my own company has had to make some redundancies
and do some restructuring. I would stress that these things are
never done lightly, indeed it is the last thing we would wish
(Mr Bagshawe) Just to build on what Peter has said,
my own company, to put it in perspective, has a turnover of around
£100 million and we operate from seven manufacturing sites
in the Midlands. We have always exported a significant proportion
of our product and historically Europe has been our major market
with the US as a secondary market. We have found the last 18 months
in particular very testing. We have indeed, sadly, had to make
some restructuring decisions ourselves and have carried these
through. The price pressures in particular driven by the euro
are exceedingly demanding. My own fear is that the worst is not
yet over, I think that next year will be again a very testing
year and the pressures will not come off. It is certainly not
just a problem experienced by Corus, it is an industry-wide problem.
(Mr Rea) It is probably worth adding as well that
across the whole product range, and the UK is fairly unique in
having such an extensive product range from a wide variety of
types of steel companies, all the markets for those product ranges
have been so severely hit by the euro/sterling question that there
are no companies in our membership that are an exception to this.
(Mr Pedder) As you said, Corus could talk extensively
about this but I think the position that Peter and the others
have expounded is correct.
35. If we could pick up one or two of the points
relating to Europe as distinct from the currency. The UK has to
operate within a European framework, there are constraints on
state aids and the way in which they are administered elsewhere
in Europe may be different from the way in which they are in the
UK. Do the Dutch, Austrian and French steel makers have structural
advantages that we do not? Are there ways in which Britain applies
European led regulation in a more rigorous or different way from
our foreign counterparts? Maybe, Mr Pedder, coming as you do from
a joint Dutch-British company, you can take this up.
(Mr Pedder) I would say, Chairman, that there are
differences borne out of the environment and out of culture but
not major structural differences between the way the various steel
companies that are our competitors operate in comparison with
us. There has been the odd instance of unfair state aid, which
is jumped on fairly quickly these days and dealt with, but I would
say that by and large the playing field in that regard is fairly
level now across the EU.
(Mr Rea) I think that is about right. We have a long
experience in Europe, of course. The ECSC Treaty predated the
EU Treaty so steel has been heavily integrated in Europe longer
than any other UK sector. The current practice and operation will
change in 2002 when the Treaty expires but there are certain key
structural points in there where I think we should be well served
by a continuation of that stringent approach to a level playing
36. What about the prospects of enlargement?
We know about the existing members but we have already discussed
with your trade union colleagues the Polish situation where the
DTI is endeavouring to get the Polish industry to restructure
itself. Is this Eurofer acting in a kind of protectionist way
or do you think there is a case (a) for enlargement and the involvement
of the Polish industry and (b) for the reform of that industry
so it is on all fours with the rest of Europe?
(Mr Pedder) Without getting into the broad politics
of the enlargement of the EU, I think as far as the steel industry
is concerned, there are sound arguments for bringing steel companies,
which are outside the boundaries now inside as long as the rules
and the state aid protections that we referred to a few minutes
ago are applied rigorously. If there is any need for transition
arrangements for companies to be modernised and brought up to
a competitive situation then any aid has to be controlled exceptionally
rigorously against delivered targets and delivered dates of achieving
a competitive and open situation. I think in general we would
welcome those companies that are outside being brought in under
the same rules as quickly as possible. There are obviously political
issues which go beyond that.
(Mr Siddall) Just to point out, Chairman, that 40
per cent of EU steel imports come from outside the EU, plus Turkey.
There are a lot of countries with important steel industries such
as the Czech Republic, Slovakia, Bulgaria, Rumania, Poland, Hungary,
Slovenia, Turkey and Latvia. They all have important steel industries
and, other than Slovenia, we would say they all need restructuring
and few are in a fit state to survive full exposure to the competition
after accession unless they have state aid. I think the key point
is it is vital all candidate countries are applying the full panoply
of EU law by the time of accession. To my mind any temporary derogations
after accession would be extremely damaging to the EU industry,
37. On page 30 of your evidence you make reference
to dumping. One would imagine that one of the dangers of enlargement
could well be from some of the countries you have suggested that
if the restructuring is not complete when they arrive that there
might well be instances of dumping. Do you have much confidence
in the ability of the EU, and in particular this Government, to
defend your corner against charges of dumping? We get the impression
from your evidence, and in particular what you say at page 30,
that frankly the British Government does not seem to be getting
behind you on these issues. Is that a reasonable summation of
(Mr Rea) It is a complicated issue this one, is it
not? I think at the bottom line we have to say that it has been
a tradition that the UK Government has not had an attitude to
challenge imports and sources of imports as vigorously and effectively
as we might have wanted. One is always aware that in a European
club there are balances of interests in these things, producers
as well as consumers and different nationalities as well. However,
HMG has been noticeable as being at one end of the spectrum which
we would regard as often unhelpful to a UK or even a European
interest. Yes, we do have some concerns that they may not be as
vigorous as they should.
38. Do you think you could give us some specific
examples in written evidence to us where you have sought the support
of Government and it has not been forthcoming?
(Mr Rea) Yes.
39. Does anyone else want to supplement that?
(Mr Rea) No. I would just add we would be very pleased
to do that because it is something we have discussed with Ministers
on a number of occasions on specific issues where we feel the
DTI has not been vigorous enough compared with its European colleagues
in agreeing European proposals for dealing with this. We will
be very happy to do that.
(Mr Pedder) I think I would only add, Chairman, in
a way it would be wrong to link accession to the EU to dumping
because those steel flows can come anyway from outside the EU
and can be dumped whether it is from a Member State or other.
As David Rea said, the proof of dumping is extremely difficult
and you need to get into a fairly detailed examination of costs
and sales price to other customers that a potential dumper might
be effecting. I think the issue is one of attitude and approach.
This is a fast moving market, the steel market, and if steel comes
in at very low prices it contaminates a market very, very quickly
for all of us and that contamination can last an extremely long
time. Therefore, any delay in taking action which holds up the
import of steel at below competitive prices really is with us
for far longer than would be sensible and we would care to have.
It is that attitude and approach to act very quickly rather than
to go through a lengthy several months long procedure that is
the scene we would like to see.