Related articles:
Transport policy, including fuel duty escalator.
Other relevant documents:
CEBR's report on the UK steel industry comparing international competitivess
Sample some of the industry's educational material at:
the Steel Industry National
Training Organisation's site and UK Steel
Association - Publications
Other links:
ISSB publishes monthly reports that are available to subscribers.
For human resource development, see the Steel Industry National Training Organisation.
For more on ULSAB, see the IISI.
In-depth articles
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Developing competitive value for the future
International Scene
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Surplus Steel Capacity: 1998 
Unit: million tonnes per annum.
Source: ISSB |
Excess capacity, and resultant oversupply, remain the dominant factors influencing behaviour in steel markets world-wide. ISSB, UK Steel Association's statistics arm estimates actual world-wide crude steel production capacity at 1,050 million tonnes. However, Steel Dynamics, the US-based steel specialist, estimates effective global steel capacity at 850mt per year, some 10% above 1999 production levels of 770mt, or 19% below the world's actual capacity. With continued gains in productivity world-wide, they estimate 40-50 mt (5%) of capacity under immediate threat of sale or closure if prices do not rise. Beneath this broad picture, the steel industry world-wide continues in full evolution. And with the structural drag on the market, it is likely to remain subject to the current influences for some time. |
These can be summarised as two countervailing pressures, with steel companies seeking ways to increase value while customers continue to demand low prices.
With price competition, we expect further international rationalisation, through mergers or take-overs, production alliances or under particularly difficult circumstances straight exits. As major producers develop their strategies, further consolidation can be expected particularly on a regional basis, both in primary production and down the supply chain, along the lines so far pioneered in Europe.
Impact on the UK
The tough trading conditions this past year have had a profound effect on the structure of the steel industry in the UK.
Capacity reductions have been achieved through closures in sectors such as tubes, reinforcement manufacturing and special steels, and through rationalisation in the wire sector.
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Following huge productivity gains per employee, which, over the last 20 years, have averaged 10% compound per annum, and are far in excess of UK manufacturing generally (3.4% pa), the UK steel industry is recognised by independent observers to be amongst the world's best, alongside the Japanese, the newer US mini-mills and Germans. The industry however continues to hone its competitive edge to reap extra value in the supply chain. |
UK Productivity Trends 
Productivity Index (1977 = 100) Source: "Sterling and the UK
Steel Industry" |
For the most part companies act individually due to commercial sensitivity, in areas such as capacity arrangements for example. However, there are issues where shared experience and common endeavour can provide a better solution, particularly where the supply chain can raise its game, such as in training and skills development.
Human resources
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Steel Industry Employers in Investors in People Companies 
As of March 1999
Note: In the above chart, the first column represents all UK companies with more than 50 employees, and the fourth column totals the figures for both Steel Training member companies and Corus Group. Source: Steel Training Ltd |
The sector spends some £65 million each year on training. International competitiveness, significantly reduced manpower levels, organisational restructuring, quality demands and the fast pace of change in relation to new technologies mean that human resource development is key to improved company performance. Steel Training/NTO, owned and led by steel industry employers, plays a vital role as the focal point for expertise in producing training and development resources matched to the industry's needs. |
Steel Industry Managers for the 21st Century is a hub project, aimed at improving management capability, by helping companies to identify their human resource needs against their business objectives, and measure the effectiveness of implementation for remedial action.
Competitiveness and the ability to deliver on quality, cost and delivery have been the focus of a very successful and fundamental project for manufacturing called the Industry Forum run by the Society of Motor Manufacturers and Traders (SMMT). Companies taking part have averaged improvements such as +40% value added per person and +40% delivery schedule achievement. A steel sector feasibility study, early in 1999, concluded that there was much to learn from this model and proposals have been developed for DTI funding of a new Metals Sector Competitive Enterprise. The focus will be on shop floor improvements to reduce costs, release cash and improve customer service; and on supply chain partnerships which eliminate waste and duplication.
To maintain a competitive edge as a high tech, lean industry, steel needs to continue to attract new entrants, particularly at school leaver and graduate entry levels. Steel Industry NTO's activities include an educational portfolio, from education-industry links through to better recognition for steel as a career choice.
Innovation
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Over the last ten years the industry has invested £350 million each year in new processes and innovation. About 10% of UK production is stainless and high alloy steels, such as engineering steels, tool and high speed steels. These high value added steels are designed to meet specific end user application criteria, such as resistance to wear, corrosion or extreme temperature. |
Steel's Contribution to Competitiveness 
UK sales prices (1990 = 100)
Source: ISSB |
Following the success of the four year multi-million pound Ultra Light Steel Auto Body (ULSAB) development project, which resulted in 25% savings in body weight and 80% gains in rigidity, the UK steel industry is working with international consortia on a further three projects. Administered by IISI (the International Iron and Steel Institute), the three separate consortia are examining advanced vehicle concepts (including safety, environmental efficiency and reparability), closures (hoods, doors and tailgates) and suspension systems.
Market rationalisation
UK Steel is a strong supporter of 'positive' rationalisation that improves UK competitive performance. On many occasions over the years, the Association has acted as an honest broker in the discussions between the market participants, the competition authorities and industry advisers, in the search and development of a solution. As in the case of the recent wire sector realignment, implementation is down to the companies involved.
Logistics and Infrastructure
The arrival of devolved government, relevant to steel producers and users, notably through the Welsh Assembly and the Regional Development Agencies for the Midlands and Yorkshire and Humberside, has seen the introduction of Local Transport Plans. These will provide the industry with the opportunity to become more involved, when local authorities are considering their bids to central Government for transport funding. Improved communications are vital for competitiveness and efficiency of service, particularly tackling motorway congestion and the development of the rail freight option.
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© UK Steel Association,
1999
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Last updated: 16th December 1999