Tag Archives: Financial Results

Coda


This is the last regular post I intend to make on this blog – from time to time there may be the occasional addition, but from now on they will be the exception rather than the rule.

The reason ? I think I’ve more or less exhausted the major stories from my career in steel between the days I started my studies in 1973 and the day I retired in march 2016. No point in mulling over stale topics, and I thought that the first anniversary of my retirement might be a good point in time to stop.

In a way, retirement has been as expected, although the possibility of coming back on a part-time basis to help out did not materialise. As far as the business and the pension scheme is concerned, things are still up in the air. Even though the financial situation of both has improved, neither can claim to be futureproofed to any major extent.

Granted that Tata had their wish in getting the defined benefits scheme shut (I haven’t heard of any date when this closure will happen), and that as a result Port Talbot’s blast furnaces were given a five year lifeline, but to be honest that’s not exactly a secure long-term future. As for the pension scheme, Tata’s ultimate goal to completely divorce itself from the British Steel Pension Scheme is only partially achieved with the closure of the defined benefits scheme, and the possibility of the Pension Protection Scheme still hangs over the proceedings.

The potential merger with Thyssen-Krupp appears to have faded away. One of the possible reasons being, ironically enough, the fact that Thyssen-Krupp’s pension is only kept afloat by the good financial results of its parent company. Would Tata really want to ditch one pension scheme only to lumber itself with another one with equal potential for economic damage ?

Whatever the case, the year since my retirement must have been filled with insecurity for all parties involved. To be honest, even I feel that I would want things to be put to bed as far as the pension arrangements are concerned. The British Steel Pension Scheme has not given any further updates since last January, probably meaning that there’s no clear way forward yet.

Until that happens, I won’t have properly retired.

Big Projects


I once read that, in order to further your career, you had to latch on to a “big” project and make a visible contribution to its success. I’ve never been as callous as to do this intentionally, and for most of my career I had very little to do with the big projects.

The one exception being my involvement with the Mossgas / Mossref project at Iscor. But that since that came with the territory of being superintendent for the plate mill, that was not even a conscious decision. The other locally big project I was involved with was Ebbw Vale’s traffic light system, and that only became big by accident, because it happened to be the right solution for the situation we were in.

But most of the rest of the time I’ve seen big projects come and go from a distance, at times being tangentially involved with them, but never in the centre of things. The last one I saw in operation was the Cost of Liquid Steel (CLS) in cooperation with McKinsey. I could see that if you managed to get on top of producing steel at minimum cost, then that could only benefit the company’s bottom line.

However, another aspect of big projects is often overlooked, which is that it withdraws much needed resources (both in manpower and in money spent) from other projects. Meaning that the savvy ones start attaching their project to the big project on the flimsiest of pretexts, in order to make sure that they’re not starved of resources. Which then dilutes the impetus of the big project because it has become too padded and bulky to achieve its main objectives effectively.

Then again, maybe I’m being unfair towards CLS – after all, something appears to have worked in bringing the South Wales branch of Tata Steel into a small profit, and maybe that was not all due to exchange rates and international steel prices. Still, I’ll always have my doubts over projects that hog the majority of the resources: after all, what is the effect of not completing the projects that have suffered from lack of resources ?

Mr. Price, Again


May ‘must be tough’ with Tata

(from the Sunday Times of 29 January 2017)

A Welsh assembly member has condemned Westminster’s lack of action to save the steel industry and has called on the prime minister Theresa May to take a leaf out of President Trump’s book and fight to protect British jobs.
Adam Price, a Plaid Cymru member for Carmarthen East and Dinefwr, writes in the Sunday Times that the US president “personally strong-arms any company threatening American jobs”.
In December, the Welsh government confirmed that it would invest £8m to keep Tata Steel in South Wales, where the company employs almost 7,000 people, including more than 4,000 in Port Talbot.
However, according to Price, the British government is doing very little. His plea comes on the eve of steel workers voting on a package of proposals that would mean cutting pension benefits to keep the plants open.
“[It] has been presented in the starkest terms, as a choice between their job or their pension,” he adds.

That would be because the choice is that stark, Mr. Price. You can’t deny that Tata have bent over backwards not to be brutal, even though they’re in a situation where it’s impossible to please everybody all of the time.

And now you want to give them a good reason to walk away and wash their hands of the whole mess, like they nearly did last year ? You appear to forget that Donald Trump is lecturing US companies to bring their business back home – he has a far greater bat to swing and the clout he has over local companies can’t be compared with the influence the UK government has over an Indian company with a British subsidiary.

Clearly some people don’t get the message when the unions tell them to keep their noses out, because they don’t know what they’re talking about.

Michael Sheen: The Fight for My Steel Town


Just earlier today I watched “Michael Sheen: The Fight for My Steel Town” (originally broadcast on 8 June 2016) on BBC iPlayer. I know, a bit late, but still good to see the period stretching from my last few months in Port Talbot until my first few months of retirement, and see how other people lived through the same period.

Since my decision had already been made a year before, I did not endure the same agony as some of the people in the documentary, but still my heart bleeds to see the upset caused by the rollercoaster ride of early 2016. It makes me realise how lucky I was to be able to jump ship on a full pension aged 60. Had I been born half a year later, things might have turned completely different, and I might not have been sitting here contemplating how things might have been. I would have been in the thick of it, and probably feeling trapped.

A pity that there appears to be no sequel planned – I would have been curious how the last six months looked like by the people that still hope to sit the storm out. But then again, that’s the media for you: as long as there’s the threat of redundancies, strikes or closures, the cameras are in place to record what happens. As soon as the initial panic is over, the world forgets about you, even though for those trapped, the problem of uncertainty hasn’t gone away.

The China Effect


Not sure when China entered my consciousness as a factor that started to affect the steel industry in the U.K. It may have been when China was building up its infrastructure and its capability to produce steel in new steel factories. At the time this meant a heightened demand for steel, and things went well as long as China’s internal demand for exceeded its capability to produce it.

However, the first time things really started to hit home was when the raw material prices, especially that of coking coal, climbed to previously unseen levels because of China’s insatiable demand for raw materials. Which was just after Port Talbot had closed one of its two coking coal batteries. So much for people in a senior position having a vision for the future.

Still, as long as most of China’s steel was used internally that was something people could live with. In a way the crash of 2008 was somewhat of a bonus, in that raw material prices took a bit of a dive, whereas steel prices stayed pretty much on the same level. Still, coming out of crash, things did not improve, and I wonder whether the Chinese economy was starting to slow down sufficiently for them to suppress steel prices across the world.

Still, it was only in 2015 that the floodgates really opened, with reports of Chinese steel waiting in Newport docks for customers. Our annual plan of making a loss of 50 million for the financial year 2015/16 was shot to pieces when we passed the planned limit after only 3 months. I don’t know why steel prices started to make a bit of a recovery in the second half of 2016 – maybe measures to counter the glut of dumped started taking effect, or maybe the lower pound just made the difference.

Anyhow, with the benefit of hindsight we should have been able to see this coming : if you first help someone build up a steel production capability second to none, should you be surprised that this capability first increases the demand for and the price of raw materials ? And surely you must expect that if the production capability starts exceeding the internal demand, then the excess steel will have to find another outlet ?

Maybe no-one connected the dots, or if they did, then maybe they didn’t expect it to happen so quickly. Whatever the case, a China with a surplus capacity larger than the total steel production capacity in Europe may well remain a headache for some time to come.