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DOCUMENT IS T H E P R O P E R T Y O F H E R BRITANNIC M A J E S T Y ' S G O V E R N M E N T
C P ( 7 2 ) 152
COPY N O
I ?
12 D e c e m b e r 1972
CABINET
BRITISH S T E E L C O R P O R A T I O N : D E V E L O P M E N T S T R A T E G Y
TO T H E EARLY 1 9 8 0 ' s
M e m o r a n d u m by t h e S e c r e t a r y of S t a t e f o r T r a d e a n d I n d u s t r y
L,
T h e M i n i s t e r i a l C o m m i t t e e on E c o n o m i c S t r a t e g y h a s n o t y e t
r e a c h e d a f i r m c o n c l u s i o n upon the p r o p o s a l s I m a d e in m y m e m o r a n d u m
t o the C o m m i t t e e , a copy of w h i c h I now a t t a c h , a b o u t the B r i t i s h S t e e l
C o r p o r a t i o n (BSC) d e v e l o p m e n t s t r a t e g y for the n e x t 10 y e a r s o r s o ,
2.
If t h e r e i s to be a s t a t e m e n t to the H o u s e b e f o r e the R e c e s s the
C a b i n e t w i l l n e e d to r e a c h a f i n a l d e c i s i o n n e x t w e e k , and s o t h a t t h e
C a b i n e t can h a v e a f i r s t look t h i s w e e k at t h e p r o b l e m s , thu P r i m e M i n i s t e r
h a s a s k e d m e to c i r c u l a t e t h i s note n o w .
3.
B S C s d e v e l o p m e n t s t r a t e g y i n v o l v e s difficult r e g i o n a l e m p l o y m e n t
problems.
A l t h o u g h the t o t a l r e d u n d a n c i e s v a r y l i t t l e b e t w e e n the
d i f f e r e n t o p t i o n s , the i m p a c t of the B S C s p l a n i s p a r t i c u l a r l y s e v e r e on
s o m e a r e a s ( e g , p a r t s of W a l e s ) .
C o n c e n t r a t i o n on a few l a r g e w o r k s in
o r d e r to b e n e f i t f r o m the e c o n o m i e s of s c a l e m e a n s c l o s i n g down s o m e
e x i s t i n g w o r k s in p l a c e s w h e r e the j o b s w i l l be h a r d to r e p l a c e .
F o r this
r e a s o n the S e c r e t a r y of S t a t e f o r W a l e s h a s a r g u e d f o r a l o w e r t o t a l
c a p a c i t y with m o d e r n i s a t i o n of m o r e of the e x i s t i n g w o r k s i n c l u d i n g
r e d e v e l o p m e n t of s t e e l m a k i n g a t Shotton, a n d n o n e w s t e e l w o r k s .
The
S e c r e t a r y of S t a t e for S c o t l a n d s u p p o r t s the s t r a t e g y g e n e r a l l y b u t would
p r e f e r t o d e l a y the n e w s t e e l w o r k s on T e e s s i d e in o r d e r to m a k e r o o m for
some additional capacity in Scotland,
4,
If e m p l o y m e n t c o n s i d e r a t i o n s d i c t a t e a c o u r s e l e a d i n g t o a l e s s
efficient i n d u s t r y t h e r e m a y b e no w a y open to u s in the E u r o p e a n C o a l and
S t e e l C o m m u n i t y of c o m p e n s a t i n g t h e B S C .
An u n c o m p e t i t i v e i n d u s t r y in
a world m a r k e t will not provide secure employment.
It i s w r o n g to s e e
the p r o b l e m a s a choice b e t w e e n m o d e r n i s a t i o n and saving j o b s b e c a u s e
without a s t r a t e g y a i m i n g at w o r l d s t a n d a r d s t h e r e could b e an e v e n
g r e a t e r l o s s of j o b s a s w e l o s e out to o u r c o m p e t i t o r s .
It c o u l d a l s o r e s u l l
i n o u r s t e e l u s i n g i n d u s t r i e s r e l y i n g upon i m p o r t e d s t e e l o r b e c o m i n g
themselves uncompetitive.
1
SECl LSI
5.
T h e B S C s p r o p o s a l s would i n c r e a s e i t s c a p a c i t y t o s o m e 36 ­
38 m i l l i o n t o n n e s of l i q u i d s t e e l b y t h e f i r s t half of t h e 1 9 8 0 s .
The
J a p a n e s e a r e building m a j o r new s t e e l w o r k s on c o a s t a l s i t e s .
The
J a p a n e s e s t e e l i n d u s t r y ' s c a p a c i t y s h o u l d h a v e r e a c h e d 140 m i l l i o n t o n c e s
b y the m i d - 1 9 7 0 s .
T h e F r e n c h a r e doing the s a m e and w i l l h a v e b o o s t e d
t h e i r i n d u s t r y f r o m a c u r r e n t p r o d u c t i o n of 24 m i l l i o n t o n n e s t o a
c a p a c i t y of 35 m i l l i o n t o n n e s by the m i d - 1 9 7 0 s .
6.
If w e a r e to h a v e a n e f f i c i e n t c o m p e t i t i v e s t e e l i n d u s t r y a s a
f o u n d a t i o n for e c o n o m i c g r o w t h , i t n e e d s t o be m o d e r n i s e d r a p i d l y .
If
i t i s to t a k e a d v a n t a g e of p r o f i t a b l e o p p o r t u n i t i e s it m u s t b e s u i t a b l y
expanded.
An a g r e e d s t r a t e g y i s e s s e n t i a l a s a b a s i s for p l a n n i n g .
The
BSC w i s h e s to k e e p it f l e x i b l e , b u t , e v e n s o , t h e r e a r e r i s k s i n p r o c e e d i n g
q u i t e a s f a s t a s the BSC would l i k e .
T h e Chief S e c r e t a r y , T r e a s u r y ,
p r e f e r s no c o m m i t m e n t at a l l to t h e new T e e s s i d e s t e e l w o r k s a t the
present time.
T h e C e n t r a l P o l i c y R e v i e w Staff (CPRS) r e c o m m e n d s
postponing its s t a r t by 4 - 5 y e a r s .
I c o n s i d e r that we s h o u l d e n d o r s e
t h e s t r a t e g y now b u t s a f e g u a r d a g a i n s t t h e r i s k s by k e e p i n g c o n t r o l of
t h e t i m i n g of two m a j o r d e v e l o p m e n t s (the new s t e e l w o r k s p r o p o s e d f o r
T e e s s i d e and t h e e x p a n s i o n of P o r t T a l b o t ) .
T h i s w e s h o u l d do by
establishing y e a r by y e a r whether the c i r c u m s t a n c e s justify proceeding
w i t h t h e n e x t s t a g e in l i n e with the g e n e r a l s t r a t e g y w h i c h we should
have endorsed.
7.
T h e s e a r e the m a i n i s s u e s w h i c h t h e C a b i n e t w i l l n e e d t o b e a r
in mind.
My c o l l e a g u e s on t h e M i n i s t e r i a l C o m m i t t e e on E c o n o m i c
S t r a t e g y a r e m e e t i n g t h e C h a i r m a n of t h e BSC on F r i d a y 15th D e c e m b e r
t o l e a r n at first hand the thinking u n d e r l y i n g the B S C s s t r a t e g y .
It
s h o u l d t h e n be p o s s i b l e for f i r m p r o p o s a l s t o b e put t o t h e C a b i n e t e a r l y
next week.
P W
D e p a r t m e n t of T r a d e a n d I n d u s t r y
12 D e c e m b e r 1972
2 BRITISH STEEL CORPORATION DEVELOPMENT STRATEGY TO THE EARLY EIGHTIES NOTE BY SECRETARY OF STATE FOR TRADE & INDUSTRY I attach a memorandum by the Minister for Industry with which I am in full agreement. Annexed to it are the British Steel Corporation proposals and the draft of a statement which I propose making in th House. P.W. Department of Trade & Industry 1 Victoria Street
London SW1H OET
24 November
1972
BRITISH STEEL CORPORATION: DEVELOPMENT STRATEGY TO THE EARLY EIGHTIES Memorandum by the Minister for Industry The British Steel Corporation (BSC) seeks our approval for its
proposed development strategy for the next 1 0 years or so, outlined
and examined in Annex A. In brief, the strategy is to concentrate
bulk steelmaking at 5 main existing plants - Port Talbot, Llanwern,
Scunthorpe, Lackenby and Ravenscraig - and to create a major new
complex on South Teesside; all the obsolescent steel making would
eventually be phased out, but there would be no firm commitment on
the timing of closures so as to retain some flexibility on the capacity
to be achieved by any particular year. Steel finishing and small
scale production of special qualities would continue elsewhere,
including Sheffield/Rotherham.
2.
In my view B S C s plant strategy makes sense. I support the aim of creating a thcrroughly modern industry as a springboard for further expansion. But the pace of the proposed expansion in relation to what I consider to be the likely growth of profitable demand introduces the danger of a poor return on investment. I believe we can secure the advantages of the strategy by giving it our backing in principle but keeping control of the pace at which it is implemented. In particular, we can allow planning to go ahead for the expansion of Port Talbot and for the new complex, but reserve the right to delay the placing of contracts until it is clearer that the market prospect justifies the expansion of capacity. BSC says it will want to place the first contracts for these in 9-12 months' time but I recommend that we should not commit ourselves to that timing. A Lower Capacity Course 3I have considered imposing a lower capacity course with no
major new works. It would greatly accentuate the difficulty of B S C s
task in retaining the co-operation of the unions and making a
success of this industry. It would mean greater reliance on
obsolescent plant and would appear inconsistent with our growth aims
in the context of the Community. Politically it would be most
unattractive.
4.
Another course would be to leave it uncertain whether there would be a new works at all. This would be intolerable for the BSC, and politically impossible for the Government. If the final decision went against a new complex the BSC would have wished to pursue a different strategy in the rest of its system. In effect we should have all the disadvantages of imposing an altogether different and lower strategy than BSC judges right, and would additionally create difficulties through the lack of clear guidance now what the industry's ultimate shape would be. BSC would have serious difficulties in planning investment at Teesside and other works, with continuing cost penalties. We should also be under great and constant pressure from local interests hoping to avoid closures. Attitude of BSC 5.
The B S C s proposals have the unanimous backing of their Board,
including Sir David Barran and all the other non-executive members.
If we impose a course that in effect rejects their strategy we should
be openly over-riding their commercial judgment. It will be difficult
/to to persuade them w i l l i n g l y to accept even t h e reservations on t i m i n g I propose, let alone actual postponement of contracts if and when the t i m e comes for t h a t . Stockholding and raw m a t e r i a l s
investment
6.
BSC has asked for reasonable freedom, if necessary, to invest in s t o c k h o l d i n g in t h e UK and European Coal and Steel Community countries and in raw m a t e r i a l s p r o d u c t i o n overseas.
I have told them t h a t I shall want to look at each significant case. Presentation 7.
T h e r e will be a great deal of c o n c e r n about prospective closures and loss of j o b s .
In m a n y cases, t h e need for flexibility prevents any d e f i n i t e statement on timing,
but I think it right t o make clear that s t e e l - m a k i n g must be expected t o c l o s e at t h e marginal works by the early eighties.
T h e r e are h o w e v e r many p o s i t i v e points in the proposed strategy and in our approach t o regional problems generally and w e should stress t h e s e .
A draft statement is at Annex B. Conclusion 8.
I i n v i t e t h e Committee to agree that w e should approve the B S C s development strategy subject t o an understanding that t h e r e is no commitment to t h e t i m i n g of s t a r t s on the n e w complex at Teesside or t h e e x p a n s i o n of Port Talbot nor to
t h e t i m e by which the full capacity proposed should b e achieved; to the line I am taking: as indicated i n paragranh 6; and that a statement should- b e made to Parliament as at Annex B. T.B. Department of T r a d e &* Industry 24 November 1972 SECRET BRITISH S T E E L C O R P O R A T I O N :
DEVELOPMENT
STRATEGY
B S C s P r o p o s a l s
1.
ANNEX A T h e main f e a t u r e s a r e :
i)
t h e development
strategy
should
provide
for a continuing p l a n n i n g p r o c e s s with c o n s i d e r a b l e flexibility
avoiding
p r e m a t u r e commitments to fixed t o n n a g e capacity by fixed dates; ii)
t h e development
programme
should have t w o main
phases,
t h e first t a k i n g capacity to a level of 3 3 - 3 5 m t o n n e s of
liquid
steel
by t h e late
1970s
and the second taking it
to 36-38m t o n n e s by t h e first half of t h e 1 9 8 0 s
attached
iii)
shows h o w these f i g u r e s might b e m a d e u p ) ;
within those
ranges, the f i v e existing m a n o r
p l a n t s , Port Talbot ,
Ravenscraig,
iv)
(Table 1
Llanwern, S c u n t h o r p e ,
should be brought
a start should
steelmaking
Lackenby and up to t h e i r optimum
capacity;
be made as soon as possible on a new steel
complex on S o u t h T e e s s i d e , w i t h a view t o b r i n g i n g t h e
first
v)
phase of t h e complex
two new mini-steelworks
into operation by 1 9 7 9 ;
should
be built, o n e of w h i c h
should be in Scotland; vi)
new a r r a n g e m e n t s
and p r o c e d u r e s
policy fields should
associated
manpower
in t h e labour and social
be e s t a b l i s h e d to h a n d l e t h e
p r o g r a m m e of c l o s u r e s .
r e d u c t i o n of about
1982/83, of w h i c h about
T h e r e would be a net
5 0 , 0 0 0 to some
20,000
h a v e already
1 8 0 , 0 0 0 by
been
announced:
vii)
capital
e x p e n d i t u r e at 1 9 7 2 S u r v e y prices would
a l i t t l e over £300m a y e a r , w i t h a peak
soon
average
in 1 9 7 6 - 7 7 o r
after.
/Background Background 2.
The Joint S t e e r i n g G r o u p
on 8 May (OR Cols 9 0 9 - 9 2 3 ) ,
recommended
that
BSC should
examine
range of 2 8 - 3 6 m ingot
within a capacity
its future development
in 1 9 8 0 - 8 l .
(JSG), w h o s e conclusions I announced
During t h e summer, t h e BSC carried
tons
out a computer­
based e v a l u a t i o n exercise t o assess a l t e r n a t i v e c o u r s e s
this range and t h e Board h a v e decided t h e i r strategy
within
in t h e light
of it.
3.
Having discarded
BSC evaluated
v a r i o u s other o p t i o n s at an early
its chosen strategy by comparison with t h r e e o t h e r s ,
in t h e main t h e upper half of t h e JSG range.
covering
flexible strategy w i t h ranges of capacity
whose t i m i n g is uncertain.
further complicated
a somewhat
product from a given crude
To supply t h e product
the 28-36m t o n s t h e n calculated.
steel
would
-
2 7 9 3 5 m t o n s instead of
T h e following t a b l e shows the
under B S C s
strategy
(on central
about t i m i n g ) compared w i t h t h e other m a i n
assumptions
higher
requirement JSG envisaged
now require crude steel capacity of only
studied
for each of t w o phases,
b e c a u s e BSC now e x p e c t s
likely p o s i t i o n in 1 9 8 0 / 8 1
This is a
Comparison w i t h t h e JSG range is
yield, i n t e r m s of finished
capacity.
stage
options
and t h e JSG range o n t h e same b a s i s :
Capacity in 1 9 8 0 - 8 1
(m t o n n e s liquid
steel)
Chosen
T S r
27A-35
Option
A
Option
B
30.0
33.1
Option
C
strategy
Lower
Path
3 6 . 2
Upper
Path
34
36
Profitability 4-
BSC examined t h e profitability
discounted
money t e r m s
Net Present V a l u e
of t h e options in t e r m s of a
(NPV) u s i n g a discount
rate of l6% in
(equivalent t o t h e public sector Test Discount
of 10% in real t e r m s ) .
On this b a s i s , t h e lower path
SECRET Rate
of t h e
/chosen chosen strategy is the most profitable course, but the margins
between the N P V s are small (less than £100 million over the whole
1
range).
5.
Nevertheless, the figures are sensitive to relatively small
variations in the assumptions used.
BSC have assumed that they
will be able to increase margins and raise their market share to
a degree that past experience and McKinsey's advice to DTI suggests
is too optimistic.
in profitability
If they do not succeed, there will be a heavy fall
(in NPV terms of perhaps up to £500 million)fromtheir
being fully committed too early to a high level of capacity, with
the incremental investment (Port Talbot expansion and the Teesside
complex) showing a low or even negative return.
This is the
justification for having reservations about the timing proposed by
BSC; the problem is more one of phasing capacity to match profitable
demand than of the ultimate profitability of the projects if
carried out at the right time.
Flexibility 6.
The flexibility emphasised by BSC lies mainly in the timing of closures.
The scope for this becomes limited by the end of this decade, when the new complex and expanded Port Talbot would be commissioned and, under B S C s lower path, most marginal plants would have been closed (except Tempieborough and Normanby Park, both making "square
1
products).
Asked how it would meet a 3m tonne shortfall in profitable demand, BSC has shown
that various steps would be open to it but there might be below-capacity working to the extent of lm tonnes.
The cost of this might be roughly offset by the lower running costs of the new plants.
This does not invalidate the view that on B S C s timetable for expanding capacity, there would be a low return on the investment if the market failed to develop favourably.
SECRET
/Economic Economic
7.
growth
All t h e c o u r s e s evaluated by BSC allow for a t o t a l
market demand of 2 2m product t o n s
in 1 9 8 0 / 8 1 ,
based on growth o f
GDP by 3-2% a year o n a v e r a g e over t h e decade 1 9 7 1 / 7 2 to
(the d i f f e r e n c e s b e t w e e n t h e c o u r s e s relate to B S C s
UK market
and the level of its e x p o r t s ) .
indicate
that t h i s t o n n a g e of product
UK home
1980/81
share of t h e
However, DTI estimates
sales would b e consistent
with a growth rate of 3^% over t h e d e c a d e , and substained
at 4% a year would
BSCs
capacity
require only a marginally
p r o p o s a l s could
rate than 4% without
accommodate an even h i g h e r
imports rose to t h e extent
some of t h e later planned
require; but if
c l o s u r e s , and t h e p r i v a t e
sector
s h a r e , some 6m additional
tons would b e a v a i l a b l e in 1 9 8 0 / 8 1 w i t h exports still at
level.
Capital
expenditure
8.
prices).
1976/77
BSCs
expenditure on fixed capital assets in
average £ 3 0 5 - 3 1 1 m a year u p to 1 9 8 2 / 8 3
S i m u l t a n e o u s development
Port Talbot
product
BSC estimates that
the UK would
growth
indicated by past t r e n d s , BSC postponed
its present market
assumed
The
It is not known how m u c h steel a
5% growth r a t e , for example, would
maintained
higher quantity.
imports reaching unacceptable l e v e l s and still
provide substantial e x p o r t s .
substained
growth
(March 1972
of t h e new complex and the
e x p a n s i o n creates a peak rising to £ 4 0 8 - 4 3 5 m in
and £ 3 4 8 - 3 8 l m
ways of limiting
in 1 9 7 7 / 7 8 .
expenditure
BSC has been asked t o examine
in 1 9 7 6 / 7 7 to a m a x i m u m
of £360m.
Employment
9-
T h e total r e d u c t i o n
in employment
is not greatly
affected by
the choice of c o u r s e , b e c a u s e most of t h e closures are the
/inevitable inevitable result of obsolescence.
The following table gives
estimates of the net regional changes in BSC manpower under
Options A and B and the chosen strategy up to 1 9 8 0 / 8 1 : Chosen Strategy Option
A
Option
B
Scotland
-8000
-8000
-7000
-7000
North
-5000
-8000
-5000 *
-3000*
North West
-4000
-4000
-4000
-4000
Yorks/Humber
-2000
-2000
-2000
E Midlands
-2000
-2000
-9000
-9000
W Midlands
-4000
-4000
-4000
-4000
-21000
-16000
-18000
-17000
-;H:­
-Si-tt
Region
Wales
Other Regions
-48000
Total
-46OOO
Lower
Path
Upper
Path
-49000
-45000
* Includes new works at Teesside Less than 500 net change
All figures have been rounded to the nearest 0 0 0
The pace of the manpower rundown depends on the timing of
1
10.
closures, on which BSC has taken no firm decisions and, under the
flexible strategy proposed, does not expect to do so yet.
An
illustrative breakdown used in the evaluation showed a peak year
in 1975/76 with 10,000 net job losses and four other years with
over 5,000.
These figures can be compared with an actual reduction
of 20,000 in 1 9 7 1 / 7 2 .
11.
There are some communities specially dependent on steel, (Ebbw Vale, Consett, Glengarnock, Cardiff, Corby and Shotton) where expected closures will pose especially acute social problems.
Apart
from Ebbw Vale the timing of these closures is not yet firm, and they are not due until the second half
&0s.
of this decade or the early BSC is itself anxious to help mitigate the consequences. The measures needed to provide
SECRET /alternative alternative .jobs in the worst
Joint action with BSC and the TUC is under
Location of new
12.
complex
BSC carried out
the new c o m p l e x
discussion.
a separate study of a l t e r n a t i v e locations
indicated that Teesside has important
A m a j o r factor w a s t h e possibility
coiled plate mill t h e r e
13-
and
cost
of using t h e
existing
savings of capital.
now proposed, t h e new complex would operate w i t h t h e
12tonnes
for
(which would otherwise be closed) as t h e
basis for a new hot strip m i l l , w i t h major
Lackenby plant
(Teesside, H u n t e r s t o n , S h o t t o n , Port Talbot
Llanwern), w h i c h
advantages.
studied; affected places are being
As
existing
as an integrated w o r k s reaching a total capacity
in t h e first half of t h e
Interdepartmental
lQ80's.
studies of labour availability,
costs and p l a n n i n g and e n v i r o n m e n t a l
of
infrastructure
considerations have
revealed
no reason to prefer any site o t h e r t h a n T e e s s i d e .
Balance of
14.
Payments BSC estimated t h e likely direct balance of payments
of operating
account of
in line with t h e strategy in t h e y e a r
(i) raw m a t e r i a l
imports but not of imports of
steel
in 1 9 8 2 / 8 3
(on t h e upper path;
lower path a l l o w s for 6 m product t o n s ) (4m product tons a r e
now).
In 1 9 7 2 / 7 3
(ii) direct of steel and other products of w h i c h BSC assumes
product tons would b e possible
1 9 8 2 / 8 3 , taking (which would be h i g h e r under lower capacity o p t i o n s ) and
sales abroad
effect
82m the exported prices and at $ 2 . 6 0 to t h e £ t h e net gain to t h e balance of p a y m e n t s would b e : ­
£m For comparison,
Lower P a t h
196 Upper
241 Path
capacity
estimates for t h e lower
1
opt ions
considered,
but For the year 1 9 8 0 / 8 1 were:
£m Option A
90
Option B
100
The benefits would be greater at a lower exchange rate. Stockholding and raw materials investment 15.
BSC has asked for reasonable freedom, if necessary, to invest
in stockholding in the UK and ECSC countries and in raw materials
production overseas, arguing that both may become important to the
success of the strategy, the former to match the concentration of
production and to forestall foreign penetration of the UK market,
and the latter to assure supplies at favourable prices.
TABLE 1 n^Ua-PHATIVri PATTERN OF LIQUID STEiSLMAKING
( M i l l i o n T o n n e s of L i q u i d
J tJCCiiiOo
*'0RKS
i:teel)
LOWEli i
1979-80
F A O I L i r i L ; . .
A T H
1982-83
1282-83
i
)
lanwern
BOS
BOO
svenscr-aig
B O S
or-t
T a i b o t
6.00
6.00
3.79
3.79
2.72
2.72
1
6.00
3.79
-*
2.72
3.20
5.20
j
c u n t h o r p e
outh
BOS
BOS
1
T e e s s i d e "
5.20
8.70
5.20
5.20
12.45
8.70
7 0
12.45
l e v e l a n d
A R C
mm
0.70
onset
B O S
M
1.20
­
1.00
tm
1.20
1.25
1.20
1.50
t
oraanby
BOS
P a r k
empleborough
A R C
Idwarke
A R C
inBley
P a r k / S t o c k s b r i d g e
an t e g
lew M i n i - W o r k s :
O t h e r
A R C
ither
A R C
G p e c i a l i s e d
W o r k s
1.5*0
0.50
0.09
0.05
0.50
0.50
0.09
0.50
0.50
0.50
0.09
0.81
0.81
0.81
0.81
33.01
36.01
35.01
0,50
ARC
A R C
T o t a l
.1.20
1.AO
1.30
A R C
o c o t l a n d
1.30
0.05
0.50
0.50
0.09
1.25
0,05
A R C
ew M i n i - W o r k s :
lorby
1,00
1.20
1.20
37.59 !
1 .
O c c l u d i n g Normanby l a r k .
2 .
I n c l u d i n g Lackenby BOS s h o p a t 5.20m t o n n e s i n a l l c o l u m n s i
and t h e new Re d e a r BOG s h o p a t 3.50m t o n n e s i n $79-30 and
7.25m t o n n e s i n 1 9 8 2 - 8 3 on b o t h p a t h s .
ANNEX B DRAFT STATEMENT ON BSC STRATEGY
V/ith p e r m i s s i o n , Mr S p e a k e r ,
I wish t o make a s t a t e m e n t on t h e
d e v e l o p m e n t programme of t h e B r i t i s h S t e e l
2.
Corporation.
The C o r p o r a t i o n h a s now c o m p l e t e d t h e work r e f e r r e d t o
in
the M i n i s t e r f o r I n d u s t r y ' s s t a t e m e n t to t h e House on 8 May on the
d e t a i l e d e v a l u a t i o n of a l t e r n a t i v e
c o u r s e s w i t h i n t h e r a n g e of
c a p a c i t y recommended by t h e J o i n t S t e e r i n g G r o u p .
In t h e l i g h t of
t h i s work, I h a v e r e a c h e d a g r e e m e n t w i t h t h e C o r p o r a t i o n on a
g e n e r a l s t r a t e g y f o r d e v e l o p m e n t over t h e n e x t 10 y e a r s .
3.
The o b j e c t of t h i s s t r a t e g y i s t o c r e a t e an
profitable,
efficient,
modern i n d u s t r y a b l e t o h o l d i t s own a g a i n s t
world
c o m p e t i t i o n and t h u s t o p r o v i d e a s s u r e d f u t u r e employment.
World
c o n s u m p t i o n of s t e e l i s e x p e c t e d t o c o n t i n u e t o grow s t r o n g l y , and
the C o r p o r a t i o n ^
aim i s t o c o n t i n u e a s t h e main s u p p l i e r of
d o m e s t i c r e q u i r e m e n t s and a l s o t o t a k e f u l l
opportunities for
k.
It
develop&ng
profitable
advantage
our
of
sales in overseas
The C o r p o r a t i o n w i l l p u r s u e two m a j o r l i n e s of p l a n t
markets
developm
p l a n s t o expand i t s p r e s e n t f i v e m a i n oxygen s t e e l m a k i n g
sites
a t R a v e n s c r a i g , L a c k e n b y , S c u n t h o r p e , P o r t T a l b o t and L l a n w e r n ­
t o t h e i r optimum p r o d u c t i o n and e a r n i n g c a p a c i t y f o r
the
C o r p o r a t i o n s s y s t e m as a w h o l e ; and t o d e v e l o p a major new s t e e l
complex on t h e s o u t h b a n k of t h e T e e s .
I t will also build
e l e c t r i c a r c s t e e l w o r k s of a b o u t %m t o n s c a p a c i t y
p o s s i b l y one e l s e w h e r e .
an
i n S c o t l a n d , and
F o r t h e new w o r k s on T e e s s i d e two p h a s e s
a r e e n v i s a g e d o v e r t h e n e x t decade or s o , e a c h of a b o u t
This works w i l l b e a d j a c e n t
tonnes
t o t h e e x i s t i n g Lackenby works and
t h e i r combined c a p a c i t y would u l t i m a t e l y e x c e e d 12m t o n n e s .
SECRET 5.
The plants so developed are expected eventually to provide
the whole of the Corporations hulk steelmaking, apart from certain
electric arc furnaces.
In the Sheffield/Rotherham area capacity
for stainless and alley steelmaking and rolling will be modernised
and expanded. For some years, steelmaking will also continue at
other centres and, even when this is closed down, finishing plants
are likely to continue in a number of these centres.
6.
The pace of development will depend on how the market develops
in the next few years.
The strategy proposed aims at completing
rapidly the transition to modern and efficient bulk steelmaking.
There must of course be flexibility to adjust plans to changing
circumstances and I' have therefore agreed with the Corporation that
its capacity should he developed as a result of a continuous and
flexible planning process, and that it should not attempt to
formulate a rigid plan reaching many years ahead.
The course of
demand, the changing efficiencies of particular plants, and the
pattern of competition and prices will need to he continuously
reassessed in reaching final decisions on new projects as well
as closures of older units.
Meanwhile: the Corporation will start
planning and design work at once for a major expansion at
Port Talbot, which would bring its crude steel capacity to
6m tonnes, and for the proposed new Teesside complex.
7m
Capital expenditure \mder this strategy is likely to average
around
£300m
a year at March 1972 prices, compared with an actual
level of £2i4-3m last year and a similar level in the current year
on the same price basis) this expenditure will help' to ensure
a high continuing work load for the plant industry.
8.
This is a strategy of modernisation and expansion.
If the industry and the employment it provides are to have an assured future it must match the standards of its competitors with low production costs combined with high standards of quality. Modernisation will inevitably involve loss of jobs;
the Government and the Corporation will work closely together to minimise the social consequences of this and to make positive plans for introducing new industry and job opportunities where they are needed. 9.
British industry requires steel of high quality at competitive prices to ensure its own contribution to growth at home, to benefit from the Common Market opportunities and to participate in expanding world trade.
A modernised British steel industry will make a vital contribution to this.
This strategy will give management and men, with their great tradition and skills, the opportunity to win for the industry its share of the expanding steel
market and to assure Britain's continuing place among the major steel producers of Europe and the world.