Steel: Recession to Slump?

As the world economy teeters on the edge of the biggest recession since the 1930s, world steel production has taken a dramatic nose-dive with Britain showing the sharpest decline of all.

With world steel capacity at around one billion tones per annum, independent analysts MEPS (International) Ltd has estimated final steel production for 2001 at 830 million tonnes, with further decreases in output forecast. Against this backdrop, officials from the world's biggest steel producers under the auspices of the OECD met in Paris on December 19 to discuss how to cut capacity and raise prices after a 20-year low with, for instance, heavily graded hot rolled steel used for white goods plummeting to less than $200 a tonne - similar to the price of bottled water. What threatens to turn recession into slump is the US determination under growing pressure from home steel makers to introduce tariffs and import controls with duties of up to 40% on imported steel.

With American productions down 11% on the year to last July, 25 steel companies have declared bankruptcy since 1998 with the rest of the industry in a financial crisis described as "going from dire to disastrous". Now US Steel, one of the two biggest producers in the United States is considering buying several ailing competitors, including Bethlehem, Wheeling-Pittsburgh and National Steel. US Steel is demanding massive aid from the Bush administration of up to $13 billion to cover pension and health obligations and a long period of protectionism. Imports surged into the US in the wake of the South East Asian economic crisis in 1998.

Meanwhile, whilst EU production is down 2%, imports have been sucked in and consolidation is the new buzzword in the industry. In February, Luxembourg-based Arcelor will begin trading. Formed by a merger of Arbed, Usinor of France and Aceralia of Spain, with capacity of over 45 million tones. NKK and Kawasaki Steel, Japan's second and third biggest producers are due to merge to form the second biggest steel company in the world. As the MEPS report points out: "The economies of India, Japan, South Korea and Taiwan are all being adversely affected by the global slowdown, particularly in the IT segment. This is translating into weaker demand for steel for investment and durable goods."

The biggest crisis, as can be expected, is in Britain though with output significantly down. Production in October at 245,396 tonnes a week was 6.9% below the figure for September and a massive 22% below the figure for October 2000. In the first 10 months of 2001 production at 268,495 tonnes a week was 13.2% lower than the same period last year, when production totalled 303,915 tonnes a week.

The massive exporting plant in Scunthorpe with capacity of around 110,000 tonnes a week is operating at 75% capacity and with higher imports and lower export volumes, Corus is set for a massive loss.

All this means that steelworkers throughout the world will have to fight every inch of the way to defend jobs and incomes. Any spark could lead to a concerted fight back; we remain confident that workers in Britain and internationally will rise to the challenge.