Corus cuts prompt general strike

The first national steel strike for 13 years looks set to follow a decision by unions in Scunthorpe to take industrial action over Corus’s plans to cut jobs at the plant.

Iron and Steel Trade Confederation members voted 63% in favour of a strike in response to the Anglo-Dutch steelmaker’s plan to impose 100 compulsory redundancies.Michael Leahy, general secretary of ISTC, said in view of the latest 6,000 redundancies around the country announced by the Anglo-Dutch steelmaker last week, the decision could spark a mass protest.

‘Clearly our members are upset, angry and bitter and it may well precipitate further requests for ballots for industrial action, and our members do not do so lightly,’ he said.

The Scunthorpe strike vote is likely to overshadow a meeting between unions and Corus scheduled for Wednesday, when the ISTC and the Amalgamated Electrical and Engineering Union will present their proposals for avoiding large-scale redundancies.The package will be designed specifically to minimise the impact of Corus’s declared intention to close two plants in Wales at Ebbw Vale and Bryngwyn and reduce manning levels by more than 1,300 at Llanwern and Shotton.

In an interview with The Engineer, Leahy said the aim was to try to make sure the rescue plan, details of which are being kept a secret until the meeting, would not conflict with rules on state aid.

‘We are working on a package that mitigates job losses that have been announced,’ he said.

It is thought part of the plan, negotiated by the AEEU, might include regional development agency grants to mothball the plants until the steel market improves.

It is unlikely however that Corus will agree to the proposals. A company spokesman said the fundamental problem is the cost of exports and a decline in UK steel demand. ‘It would be very difficult to see how the demand problem can be reversed,’ he said.

Meanwhile, Welsh Assembly agencies are drawing up a wider regional aid effort to stave off an economic meltdown following the plant closures.

Welsh Assembly deputy first minister, Michael German said although there had been no calls for wholesale strike action in Wales, he thought the region ‘should fight the closures hard.’

However, he told The Engineer that the Welsh Assembly was preparing for the worst, warning more than a total of 12,000 people could be affected by the closures.

‘We know of 3,800 direct job losses. This includes Corus and on-site subcontractor jobs going. Then there is the second tier of suppliers. This could mean up to 12,800 jobs going because of the multiplier effect. That is dependent on the supply chain and the proportion of supplier companies’ workforces that are dependent on Corus’s business.

‘Our first job is to match the skills and location and age profile of the redundant workers to the job vacancies, and we will also offer counselling on such matters like mortgages. We will be asking banks to go easy on those made unemployed.’

German said on Wednesday that central government had yet to decide how much to spend on the aid package which was discussed earlier in the week at a meeting of the Prime Minister Tony Blair and Welsh First Minister Rhodri Morgan.

…as experts predict market upturn

Corus’s decision to axe 6,000 jobs from its UK steel plants could prove premature, experts predict. Industry analysts argue that the price of steel will rise later this year.

A fall in UK demand for steel forced Corus to rely on its export market, which has been hit by a drop in world prices and the high pound to euro exchange rate.

However, a report published this week by Australian investment bank Macquarie Equities suggests the steel market will begin to recover by mid-2001.

The predictions come as opposition politicians suggest Corus mothballs a number of its UK plants until conditions improve.

The bank’s report says world steel production grew to record levels in 2000, leading to over-stocking by buyers. Steel prices fell sharply in recent months as companies de-stocked.

But the market should soon begin to improve, the bank predicts. ‘Assuming that economic growth rates recover, production should rise by 4.1% in 2002,’ the report states.

Philip Tomlinson, director of steel at specialist metals industry consultancy CRU International, agreed much of the recent slump in demand could be blamed on customers over-stocking last year. He expected the sector to bounce back later in the year.

‘Life in the steel industry will improve in the second half of this year,’ Tomlinson said. ‘Once companies have cleared their inventories there should be a market rebound. And it is also likely that the pound will continue to decline against the euro.’

While the weakness of the euro has made exporting steel less profitable, this is likely to be a short-term problem, Tomlinson added.

‘People forget that this cuts both ways. In the mid-1990s British steelmakers were making tremendous profits, and continental producers were struggling.’

And in a further boost to exporters, Prime Minister Tony Blair announced in Parliament on Wednesday that a decision on joining the euro would be made within two years after the next general election.

A spokesman for Corus said the company had tried to hold out against declining UK demand and unprofitable exports, but had finally accepted cuts were unavoidable. ‘Our UK operation was losing more than £1m a day, and lost more than £300m over the financial year 2000 — those kind of losses we just couldn’t afford to sustain.’

Corus is reported to have ruled out any future capital investment in the UK, and said spending would be kept to a minimum. This has raised union fears of further plant closures.

‘Hopefully the programme will be sufficient to bring production in the UK in line with demand, but in the business world you can never give any guarantees,’ said the spokesman.

A senior executive from another steelmaker said the whole sector was facing the same pressures. The UK market for one of his firm’s commodity products had dropped by 30% over three years, he said. ‘That’s not because we’ve lost big orders, it’s about UK manufacturing going offshore — 101 little manufacturing companies who bought it have disappeared.’

John Anton, steel analyst for Standard & Poor’s DRI, said Corus’s decision was regrettable, but unsurprising in a global industry with large-scale over-capacity.

‘There are too many people in the lifeboat, and no-one wants to be the first one out. But someone has to be.’ The price of steel worldwide is very low, with new mills in areas such as south-east Asia capable of producing steel for export at much lower prices than the older UK mills.

Other steel producers will soon be forced to follow Corus’s lead, he predicted. ‘Large, old mills with huge workforces will eventually go the same way as the coal mines.’

The story so far:

30 September ’99Corus is announced as the new name for British Steel following its £3bn merger with Dutch firm Hoogovens. The Dutch government offloads its stake in Hoogovens a few days later, causing chaos on Corus’s first day of trading.

31 January 2000The company signals a cost savings package, but refuses to comment on speculation that it will result in 6,000 job losses. British Steel reports a pre-tax loss of £167m in the six months to 2 October, 1999.

17 June 2000Corus announces more than 1,200 redundancies at steel plants in Rotherham and Sheffield. The move is condemned by MPs as ‘the red meat the City investors have to be fed’. In the next week Corus reports a pre-tax loss of £113m for the six months to 1 April.

15 July 2000Another 1,200 redundancies are announced at Scunthorpe and Teesside plants. In the following week the total number of job losses for the year is taken to more than 4,000 with the announcement that a further 1,600 are to go from Corus’s Llanwern and Ebbw Vale plants.

16 August 2000Shares in Corus take a dive after US investor Franklin Templeton reduces his stake to 3.55% from 8.85%. The share price falls by 14% in less than a week.

18 August 2000The company seeks a grant towards a £35m refit at Llanwern in a move to safeguard 2,500 jobs. But in the following month Corus warns the continuing weakness of the euro is ‘a major cause for concern’. The company shelves the launch of a £301m bond issue.

6 December 2000Jan van Duyne and John Bryant are sacked from the Corus board. Sir Brian Moffatt takes over as temporary chief executive. Rumours circulate that Llanwern will be closed.

15 January 2001The government prepares to offer Corus a £20m tax concession in a bid to safeguard Llanwern.

22 January 2001Ministers are reported to be threatening Corus with a £400m bill to clean up the Llanwern steel plant if it is closed.

26 January 2001Stephen Byers, trade and industry secretary, accuses Corus of ‘defeatism’. He says the currency problems facing Corus have eased and the company’s two chief executives were replaced because ‘they were not prepared to adopt the short-term approach’ and ’embark on plant closures’.

31 January 2001Corus outrages workers at Llanwern by rejecting a union plan to buy the plant. The company says such a move would be against its interests.

1 February 2001Corus announces 6,000 job losses with 2,800 to be cut from the South Wales workforce and 1,600 to go in Teesside, Yorkshire and other plants in north east England. Unions say they will press ahead with strikes.

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