Metal industries: Back in Force
For a sector that was in crisis as recently as 18 months ago, the UK steel industry now seems to have entered a new phase of stability and is starting to plan for the future. Andy Sandford reports.
“It was certain then that we were in a crisis; I don’t think we are there at all now. Given exchange rates, the price of steel globally has increased significantly, and we have also
seen a drop off in Chinese steel imports.” He added: “We have seen a number of new players coming into the market and that provides a real positive impetus to the whole sector. It is looking forwards, it is talking about a vision for the future and it is talking about investment for the future, which we wouldn’t have had before.”
These new players have quickly set about consolidating and adding to their operations. The former Tata Long Products Business, centred on the integrated iron and steel plant at Scunthorpe and now branded British Steel by new owner GreyBull Capital, was quickly able to announce a turnaround.
The company was in profit by the third quarter of 2016 and in June 2017 announced a £47m pro t for its first year, compared with a loss of £79m in the previous financial year.
It also announced plans to invest a further £40 million in 2017-18 and made its first acquisition, FNsteel in the Netherlands, which manufactures wire and wire products that complement those made at Scunthorpe.
Liberty Group on acquisition trail
The Liberty House Group, which took over Tata’s Dalzell and Clydebridge rolling mills in 2016, built on its 2016 acquisitions with purchases in steel, aluminium and down- stream manufacturing processes.
The Group’s strategy is to create a fully-integrated UK industrial supply chain, from raw metal production through to components and highly-engineered products, such as lightweight advanced braking systems.
The foundation for this is its GREEN- STEEL concept of supporting its manufacturing activities with sustainable energy supplies from wind, hydro, tidal and bio-fuel sources. This has been extended to the aluminium sector with the Group’s £330m acquisition of the UK’s sole aluminium smelting plant and associated hydro-electric power plants in Lochaber, near Fort William, Scotland, from Rio Tinto.
In May this year, it completed the purchase of Tata’s Speciality Steels business for a total consideration of £100 million. The acquisition was a major step forward for the group as, for the first time, it now has steel melting capacity in Britain.
Speciality Steels makes high-value steels for the aerospace, automotive and oil & gas industries, using recycled scrap, melted in two electric arc furnaces at Rotherham. This steel feeds down- stream casting, re-melting and rolling processes.
In 2018 a mothballed arc furnace will be recommissioned, with a scrap melting capacity of 1.2m tonnes a year. The Group aims to increase its arc furnace capacity to 5m tonnes a year within five years.
Further investments by Liberty included the purchase from Tata of its Hartlepool 42- and 84-inch submerged arc welded tube mills, which produce pipeline for the oil and gas industries. The Group aims to supply the mills with steel from its plate facilities in Scotland.
In July, Liberty purchased Caparo Merchant Bar in Scunthorpe from administrators. Now renamed Liberty Steel Scunthorpe, it has two fully-automated rolling mills, producing a range of steel bars and light sections.
Liberty expanded its footprint in the automotive sector with the acquisition in January of CovPress, a Tier 1 supplier of vehicle pressings and assemblies to customers including Jaguar Land Rover, Renault and GM. It followed this in July with the purchase of Amtek UK, another Tier 1 automotive supplier, which has two plants in the West Midlands and one at Witham in Essex. These manufacture aluminium die castings and undertake a range of complex processes including machining, assembly and testing of parts for engines and powertrain components.
Liberty is also developing a manufacturing plant next to the Lochaber plant at Fort William. It will supply around 2m aluminium wheels a year to UK vehicle manufacturers.
A spokesman for the Group said: “We believe that there is a strong trend towards reshoring the UK automotive supply chain – particularly post-Brexit – and Liberty wants to play a big part in that.”
Meanwhile at Tata…
The future of the remaining Tata Steel operations in the UK looks somewhat brighter, following the proposals for a joint venture with thyssenkrupp AG. This would create a leading European steel enterprise by combining the at steel businesses of the two companies in Europe and the steel mill services of the thyssenkrupp group.
The proposed 50:50 joint venture – thyssenkrupp Tata Steel – will focus on premium and differentiated products, with annual shipments of about 21 million tonnes of at steel products.
Tata also announced investments of around £30m in its South Wales steelmaking operations, including the replacement of a 330-tonne capacity Basic Oxygen Steelmaking (BOS) vessel at its Port Talbot site. This is part of a programme to allow it to develop next-gener- ation, high-performance steels for electric vehicles.
A major story in the aluminium sector was the move by Norsk Hydro to take full control of SAPA, the world’s biggest aluminum extruder, by buying out Orkla, the other 50% shareholder, for NOK 27bn.
“Hydro and Sapa complement each other,” explained John Thuestad, head of Norsk Hydro’s extrusion business in Europe. “Hydro will now be the only global aluminium company that is fully integrated across the value chain, establishing a platform for further growth.”
He adds that, despite being a global business, Hydro is very much about local production for local markets. This was clear in September when Sapa reopened a factory in Bedwas, near Caerphilly, South Wales, to supply the growing auto- motive industry demand for lightweight body structure solutions. It spent £9.6m on refurbishment and new equipment for the plant. The first customer is London Electrical Vehicle Company (LEVC), which has developed a zero-emissions, aluminium-bodied black cab.
“We had to end extrusion operations in Bedwas in 2014 due to overcapacity in the market, but we are now pleased to be able to return to Wales with our new automotive components business,” Thuestad said. “This is a good example of how industrial companies such as Sapa are growing in advanced markets, fuelled by demands for lighter vehicles and more sustainable materials.”
Also in South Wales: Caledan, a new company, has opened a £1m cold-rolling mill that will supply structural steel frames to the construction industry. The facility was backed by £134,000 of Welsh Government funding. The mill can produce 20,000 metres of stud and track in a single eight-hour shift and produce 1,000m2 of load-bearing steel frames for buildings per day. Caledan has signed a number of major contracts with UK firms to distribute its products.
The future of steel
“Ultimately, what we are looking for is similar to what we were asking for a year ago, but where it has changed is that we have moved on from going to the Government for help. We are now putting forward a vision for the future and what we need in order to achieve it,” Richard Warren, UK Steel’s head of Policy and Representation, explained.
“The sector is offering a 50% increase in capital investment, which could perhaps create 2,000 to 2,500 extra
jobs in the industry. We are talking about substantial increases in capacity, both brand new and, just as important and exciting, de-mothballing some of the capacity that has been mothballed over the past few years,” he continued.
“There is also a fairly exciting proposal for a big injection of new R&D funding, to make existing processes more efficient and also to look at completely new and innovative ways of making steel. The other side of that is working with our supply chain partners and our customers to find out what products they need in the future.”
In return, the steel sector is asking for help on energy prices – crucial for the profitability of current and future electric arc steelmaking, as well as reduced business rates, and investment aid.
“A lot of that commitment to future investment does hang on the Government working with us to ensure that we have a competitive business environment in the UK, so that when those companies make investment decisions, the decision is to spend that money in the UK and not elsewhere,” said Gareth Stace. “That is a very clear message from us to Government. These investment decisions are being made on a weekly and monthly basis. The Government needs to work with us to ensure that we get a favourable outcome here. “It all sounds extremely positive, but we must remember that we are positive because 18 months ago we were staring into the abyss,” he added. “Everything is not rosy; companies are not making vast amounts of cash. What they are making are pro ts that will hopefully enable them to tick over. What we need to do as a sector is to make enough return on those investments in order to start actually investing in new plant and machinery, to improve our productivity to be able to compete in the fierce global steel market.”
Andy Sandford is a writer and consultant specialising in manufacturing technology. He edits Engineering Capacity and Quality Manufacturing Today and is a director of the Engineering Industries Association