UK: Steel's big chill. (1 of 3)

UK: Steel's big chill. (1 of 3) - After all the struggling, British Steel is now profitable. But, Daniel Butler asks, how long can it last?

Last Updated: 31 Aug 2010

After all the struggling, British Steel is now profitable. But, Daniel Butler asks, how long can it last?

"When we lost the strike I thought that was it - that steel in South Wales was dead. Luckily I was wrong." W O Williams (WO to everyone) smiles at his premature pessimism. As vice-president of the Port Talbot works' union and management "Slimline Committee", he has worked in the plant since 1959 and seen a revolution over the past few years.

But any optimism is tempered. As he stares at the plant sprawled out over a four-mile long stretch of reclaimed sand dunes, the former rugby international knows that its owner, British Steel, is facing its biggest crisis in 10 years. Recession has returned to an industry that has already been through a decade of upheaval. Instead of finding itself in the land of milk and honey after the trials of the wilderness, 1991 looks grim.

On the surface British Steel seems symptomatic of the success of the Thatcherite revolution decade. A loss-making monolith for the bulk of its unhappy 21 years in the public sector, the '80s were marked by a painful period of cost cutting. At the beginning of the decade it was the fourth biggest producer in the world, but rather than benefiting from the economies of scale, its losses were equally gargantuan: they amounted to £1.8 billion that year. It was a cost that the Government was not prepared to sustain. Ian MacGregor, then a comparatively unknown Scot who had made his name in the American mining industry, was hired to streamline steel. Over the next few years 100,000 jobs went - two thirds of the workforce - and by 1986 not only was it recording a profit but it was also regarded as one of the world's cheapest steel producers.

The changes are clearly demonstrated by the experience of the Port Talbot works in South Wales. In 1980 it took 12 man hours to make one tonne of steel. By 1981, following the strike, this had halved to six man hours, and today it stands at just over three. Over the same period the number of people employed by the works dropped from over 13,000 in 1980 to today's 4,469. The scale of production is still impressive.

The plant has its own deep-water port where ore and coal are unloaded. The coal is converted to coke in the plant's ovens and the iron ore reduced to liquid iron and slag in two huge blast furnaces. Still a red-hot liquid, it is ferried to the steel plant where 75 tonnes of scrap, 20 tonnes of lime and 300 tonnes of liquid iron are mixed with oxygen to produce 325 tonnes of steel every 40 minutes.

The visitor is struck first by the sheer size of the sheds. Most seem empty. Movement comes from giant automated ladles and rows of rollers that suddenly burst into action, shooting 30-foot blocks of glowing steel along the building, apparently at random.

The plant director, John Madden, has seen great changes in the plant since he first joined as a chemist in 1950. "We had to learn the facts of life in 1980," he says simply, before adding with pride: "The kit here is now as good as any in the world."

The announcement of a £72 million investment in a second continuous casting plant makes Madden optimistic. "We should get below three hours to the tonne," he says. "And, within reason, I can't see any limits to further improvements."

It was this level of performance which made steel a prime candidate for privatisation. Nevertheless, the flotation was almost a disaster. Coming a year after Black Monday, investor confidence was low and the share price failed at first to match the soaring early performances of privatisations before or since. But those investors who adopted long-term positions were not disappointed: in the latest financial year the company's pre-tax profits climbed to £733 million, and with new investment programmes in place, the rewards looked set to rise inexorably.

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