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Teesside Steel Industry

Volume 502: debated on Wednesday 16 December 2009

It is a pleasure to see you presiding over this important debate, Mr. Cook. Had you not been presiding, I am sure you would have joined in the debate, as I know that this subject is close to your heart.

First, I thank Mr. Speaker for granting me this debate on what is an important subject for my area—steel is the lifeblood of our economy. Nearly a fortnight ago, Teesside was rocked by the disastrous news about the mothballing of the integrated iron and steel plants of Redcar and Lackenby. That news has destroyed the festive spirit of thousands of families across Teesside. The plants are in constituency of my hon. and learned Friend the Member for Redcar (Vera Baird), who is taking a lead on this matter and has been fighting hard. However, many of the job losses are in my constituency.

I was once one of the many thousands of people who worked at that plant. As a young graduate engineer, I worked on bringing the Redcar blast furnace—the biggest blast furnace in western Europe—online in 1978-79. I worked on that furnace for eight months, and many years later I remember my many trials and experiences with it. Therefore, I have a deep, emotional attachment to this matter.

I shall talk generally about the steel industry on Teesside, including the importance of research and development. Then I shall say a few words about the steel industry in my own constituency, in particular the Skinningrove works. Then I shall raise the big issue that I mentioned earlier—the mothballing of the integrated plants in Redcar and Lackenby.

The importance of the manufacturing industry for our economy has been underestimated. We cannot survive as a nation on an economy that seems to range from pizza parlours to DVDs or sportswear retail warehousing. Manufacturing accounted for more than 20 per cent. of the economy in 1997 when Labour came to power and criticised the country for having too narrow an industrial base. However, by 2007, that share had declined to 12.4 per cent. Why is manufacturing important? Quite simply, it acts as a multiplier across all boundaries of the economy. It encourages the development of human skills, and the development of an infrastructure to support those skills. It also encourages research and development and the spread of innovation.

I will say a few words about steelmaking on Teesside. Steelmaking has been central to our economy since the mid-Victorian age, and has evolved over the decades to the position that it is now in. The main works line the River Tees and the core of those works is found in the Teesside Cast Products iron and steelmaking complex, whose mothballing has been announced.

At Grangetown, we have a fully functioning and impressive steel technology centre. That centre has an international reputation with an outstanding pilot plan, and many brilliant metallurgists, engineers, technologists and scientists work there. I must declare an interest, as I am a former employee of the research centre, and I had 14 happy years working there. Some of the work that I undertook at the Teesside technology centre was connected with the completion of what was then the British Steel Redcar works, and the commissioning of the new blast furnace. At that time, the furnace was considered the biggest in the UK; I seem to recall that it was the biggest in Europe.

The furnace in Redcar was a great British achievement. It was to make iron for feeding to the Lackenby basic oxygen steel plant, and the associated continuous casting plant. Both were then state-of-the-art steelmaking and processing plants and, due to regular upgrading, they are still world-class plants today. They deserve more than merely being consigned to the scrap heap of past manufacturing glories, left to be of interest only to the industrial archaeologists of the future.

It is an honour to be here with you today, Mr. Cook, and I congratulate my hon. Friend and praise him for the great work that he and other Teesside MPs have done on this issue.

The reality is that we need to keep this plant going. If we are ever to deliver the low-carbon economy that we have promised for the north-east, and develop things such as underground gasification of coal, carbon capture and storage, and sequestration of CO2, we need to develop skills, not lose them. We should not consign them to history as has happened to so much of our industry in the north.

I agree with every word and thank my hon. Friend for his support. He must have read the rest of my speech, as he is way ahead. I concur with the tenor of everything he said.

I must declare an interest because members of my family work at Corus on Teesside. The Copenhagen summit is taking place as we speak, and a low-carbon future for the world is being discussed. Does the hon. Gentleman agree that there is no better place than Teesside, with the skills, industrial heritage and facilities that it has available, to lead the world in that? Is this news not a bitter blow that must be overcome so that we can use that fantastic potential on Teesside?

I agree with every word that the hon. Gentleman has said. I hope he is saying that we have to keep the works open. If he is, I am wholeheartedly with him all the way. The sentiments he expresses are similar to those expressed by my hon. Friend the Member for Blaydon (Mr. Anderson).

In my constituency, we have the world-class Skinningrove rolling mills, which until now have concentrated on small sections for the construction machinery sector. They have recently moved into supplying sections for the wind farm industry, which is seen as a sector where exponential growth can be expected. The mills have a vigorous and dynamic management and a committed work force who want the plant to grow and prosper.

I have helped the mills over recent months by brokering an offer from the local authority, Redcar and Cleveland borough council, for business rate relief. That offer is substantial, and I hope the Minister will join me in praising the dynamic management and the work force of Skinningrove works for their hard work and commitment.

I come to the subject of Teesside Cast Products and the disastrous news about the mothballing of the integrated iron and steel plants of Redcar and Lackenby. There is also the sad news that 1,700 steelworkers might be made unemployed. Furthermore, it is estimated that 8,000 people down the supply chain will lose their livelihoods.

The autonomous complex within Corus called Teesside Cast Products was once seen as the future of steelmaking—not just in the north-east, but in the whole country. The future of Teesside Cast Products was secured by a deal with a consortium that agreed to purchase almost 80 per cent. of the plant’s output until 2014. That consortium included steel traders from Korea, Mexico and Italy. However, when the demand for steel across the world dried up, the partners, led by the Italians, tore up the agreement and announced that they would not buy any more steel.

I place on the record my great praise for all the efforts made by my hon. and learned Friend the Member for Redcar to reach commercial solutions with the consortium to preserve production at Teesside Cast Products. In fact, she went to Italy to try to persuade the Italians to come back to the table. She displayed great courage.

On Teesside, all is not lost. After all, the Teesside Cast Products plant has not been closed completely and, according to Corus, will be kept in a state of total readiness for any possible restart. A full maintenance team will be kept in employment purely for such an eventuality. I need to stress the fact that bringing a blast furnace back online can be done. It was recently done at Port Talbot, after a year’s shutdown. It was also done at the associated Corus plant at IJmuiden in the Netherlands.

I recognise that the Government have said that they are prepared to help Corus on Teesside, but that seems to be limited to the same recipe of cash for training and retraining. That support is important and helps those displaced by the Corus announcement to find other employment in the local labour market. Positive action in finding other industrial uses for the Redcar and Lackenby site is also welcome. That could be one of the new generation of carbon capture power stations recently given the go-ahead by Government, or used for other low-carbon applications. However, I still believe that that is not enough.

I am delighted that my hon. Friend has secured the debate; I am only sad that it lasts just 30 minutes. References have been made, and he is now making them, to the amounts of money that we require to ensure that we keep steel making on the Tees. Reference has also been made to the European globalisation adjustment fund, which we could tap into. That is a seriously large sum of money. In his opinion, will that be the next step that we take to ensure that we retain and maintain steel making on the Tees?

I thank my hon. Friend for being here and supporting me. I agree with her on the globalisation adjustment fund. That is one of the questions that I intend to raise with the Minister.

We need to keep the plant alive and making a contribution to the regional and national economy, both as we go into the economic upturn in the new year and in the coming years. I feel strongly that there is a 10 per cent. chance of keeping the Redcar steel complex open and we must do everything possible to keep it open. Also, to realise the vision originally held for Teesside Cast Products of a high-quality producer of bulk steel for the world re-rolling market, we must urgently search for new partners. The responsibility for that lies with Corus and the Government.

There are still, I believe, windows of opportunity. I am told that the Pacific rim, for example, has hardly been affected by the downturn in terms of infrastructure projects. Granted, new steel-making capacity will be coming on stream in future years in that region, but that will take a long time to bed in. Teesside is an existing world-class iron and steel-making complex and its products are tried and tested.

While my hon. and learned Friend the Member for Redcar has taken the lead with Corus, I have made every effort and used all my links with Tata to find possible solutions. In the many conversations that I have had with the members of the Tata board, it has been clear that they feel that the Government have not done enough to help the industry; they had lost confidence in the Government’s support for steel.

I welcome the announcement that the Government allocated £60 million in a response package, but the Minister will know that there has been some concern in the media and on Teesside about that announcement. I shall therefore ask some important questions and seek reassurances. How much of that cash will come from existing budgets within his Department and the regional development agency, One NorthEast, and is that cash guaranteed for Teesside?

Will the Minister reassure me that the cash allocated to help apprentices is safe, and will he name the agency that is to handle that work? Will the cash from the strategic investment fund, boosting efforts to build a low-carbon economy in the region, come to Teesside, given that previous commitments to the new and renewable energies cluster were for the whole north-east? Are those low-carbon funds as yet unallocated? Will the cash for biotechnology initiatives be used to offer new employment openings for displaced process workers affected by the Corus mothballing?

Companies such as Progressive Energy, bidding to build an 850 MW power station on a site nearby, have suggested that their work could keep the Corus plant open by capturing carbon dioxide from Corus operations, thereby allowing Corus to bid for carbon credits. Will the Government, through the Department of Energy and Climate Change, examine that possibility, along with similar opportunities?

Will the Government apply for financial assistance under the European globalisation adjustment fund, mentioned by my hon. Friend the Member for Stockton, South (Ms Taylor)? That could be used to lessen the blow to individuals by allowing cash from the fund to supplement the training packages being devised. Will the Minister accept the Government’s role in providing match funding for that if it is required?

Crucially, even at this late stage, I urge my right hon. Friend the Prime Minister to pick up the phone and call Ratan Tata, chairman of the Tata Group, and Mr. Muthuraman, former managing director of Tata Steel who is now the vice-chair of the Tata board, to invite them, along with Corus chief executive Kirby Adams, to an urgent steel summit in No. 10 Downing street with the trade unions.

I urge the Prime Minister to approach that meeting as he did the meetings with the bankers, to ask Mr. Tata what the Government can do to keep the plant open, and to do it for the sake of all the people on Teesside whose livelihoods are threatened. I can tell the Minister that I have spoken to the representatives of the Tata board and they are willing to come to No. 10 Downing street to discuss with the Prime Minister a rescue package to keep the Redcar steel complex open.

Steel and Teesside are inseparable in the consciousness of my constituents. In more practical terms, the livelihoods of tens of thousands of Teessiders and their families depend on steel. I hope that the Labour Government, whom I have supported passionately on every occasion since 1997, will join me and give further support to the ideas that I have suggested today, because the opportunity exists. I want our Prime Minister and his Ministers to take that opportunity. Do not let us down at this time.

I congratulate my hon. Friend the Member for Middlesbrough, South and East Cleveland (Dr. Kumar) on securing this debate. I know how much the steel industry means to him personally—as he said, he worked for many years in the steel industry at Teesside—and to his constituents. It is in his blood, as it is in theirs.

I note the presence here today of other Members from the area, including my hon. Friends the Members for Blaydon (Mr. Anderson), for Stockton, South (Ms Taylor) and for Hartlepool (Mr. Wright), and my hon. and learned Friend the Member for Redcar (Vera Baird)—and you, Mr. Cook. As my hon. Friend the Member for Middlesbrough, South and East Cleveland said, as a constituency MP you too have a great interest in the subject.

If anyone doubted the strength of feeling in the local community about what is happening at the Teesside plant, they need only to have seen the demonstration of support at Middlesbrough’s Riverside football ground over the weekend. I understand that. I understand the pain caused by the loss of a steelworks in a local community, as steel runs through my constituency too. It is now 30 years since the Bilston steelworks closed, but local people remember it as though it was yesterday. It has taken a long, long time for the area to recover.

The current recession has hit the steel industry hard. Three specific factors serve as the backdrop for Corus’s decision to mothball the Teesside plant. The first is a fall in demand. This year, steel production at Corus is expected to be some 33 per cent. down on 2008, and only about 60 per cent. of capacity. Teesside Cast Products—TCP—makes steel for export, but if we compare the first nine months of 2008 with the same period in 2009, we see that steel demand throughout Europe has fallen by 40 per cent. The potential for the company to trade its way out of its difficulties in this country is severely limited.

The second factor is a fall in price. Between July 2008, when prices peaked at just over $1,000 per tonne, and December 2009 the price per tonne of the kind of steel produced at Teesside has fallen by nearly 60 per cent. That has left Corus struggling to cope with the twin problems of a fall in demand for its product and a fall in price. Not surprisingly, that has put severe pressure on Corus’s finances and the economics of its steelmaking operations, hence the announcement of large-scale job losses twice this year, even before the Teesside announcement a couple of weeks ago.

Given the time that is available, I do not think that Teesside wants an explanation of the problems faced by Corus; it wants to know why the Government have failed to act in bringing together the right sort of people in a summit to save Corus. Will the Minister move on to that?

If the hon. Gentleman wants to talk about failure, I simply turn to the Opposition’s continued opposition to the fiscal stimulus that has boosted demand for steel products. I am not going to take any lessons on inaction from a party that, throughout the recession, has consistently called on us to cut spending. That would have hurt steelmaking even more than the difficulties I have outlined.

It is important for us to hear from the Minister. The press say that the Government are apparently blocking attempts by the regional development agencies to access funds, and are failing to match the support given by other European countries to their core manufacturing industries. We need to know this afternoon whether there is any truth or credibility in that.

I assure my hon. Friend that we are not in the business of blocking anything that might be constructive for the future of the Teesside plant or the area. In contrast, our response has been both swift and significant in scale.

The third reason for Corus’s decision, to which my hon. Friend the Member for Middlesbrough, South and East Cleveland referred, is specific to the Teesside plant: the collapse of the off-take agreement to buy the steel produced there. The agreement was reached in December 2004. Under it, 78 per cent. of the slab steel produced at Teesside was to be sold at cost over a 10-year period to a consortium of four foreign steel companies. Earlier this year, that agreement broke down, in part because the world market cost of steel had fallen below the cost of producing steel at Teesside; the off-takers walked away from the agreement.

I spoke at the time to Corus chief executive Kirby Adams and to Antonio Marcegaglia of Marcegaglia steel, the lead partner in the consortium, to encourage them to resurrect the off-take agreement. I asked the two sides to meet again to try to resurrect the agreement, and stressed how critical it was to the future of the plant and to the thousands of people of Teesside who depended for their livelihoods on the continued operation of the plant—the reason for the agreement. Members will know that that meeting took place in July, but no agreement was reached.

Against a background of falling demand and a depressed price, and with no partner for its product, the future for TCP looked bleak. Despite that, Corus tried to keep the plant alive, transferring internal work to it and securing some short-term export work. Eventually, however, the three factors that I mentioned earlier took their toll, and the decision to mothball the plant was announced.

Throughout, the Government did what we could to keep up demand for steel. We brought forward capital spending on construction, which accounts for about half the steel used in the UK. Without that investment, the UK construction industry would be flat on its back. We also committed £400 million to the car scrappage scheme to underpin the vital automotive sector, another very large user of steel. Again, I stress that those stimulus measures were opposed every step of the way by the Opposition. Had we taken their advice—if they had had their way—demand for steel would have been hurt even more than was dictated by the market conditions.

I set out the background in order to make it clear that Corus’s decision of a couple weeks ago was not taken as a result of Government inaction. We went the extra mile to try to boost demand and to resurrect the off-take agreement upon which TCP depended. Corus has not asked for aid to keep the plant open, which in any case is not possible under state aid rules. The fact is that Corus cannot run the plant without customers and without demand for the product it makes.

I am keen to press on if my hon. Friend will forgive me.

As a result of Corus’s decision, 1,700 people employed directly by the company will lose their jobs, as will a further 1,000 sub-contractors.

In the couple of minutes left to me, I want to move on to the questions about the support package that have been asked today. The Government have moved quickly. The Prime Minister and I have both spoken to the chief executive of Corus. The chief executive has stressed that the site is mothballed and that no decision has been taken to close it permanently. Of course, market conditions may change, a new partner may be found and steel could be produced again at the site. I tell my hon. Friend the Member for Middlesbrough, South and East Cleveland that if we can help to bring that about, we will do so.

However, those possibilities will not come about easily, and it would be wrong of the Government to stand back and wait for that to happen. The people affected by this announcement need help now. That is why my right hon. Friend the Secretary of State announced a £60 million package of support. My hon. Friend asked some questions about that funding. It includes £30 million of new money from the Government’s strategic investment fund, and £30 million from One North East, the RDA, which is to be reprioritised from within its existing resources.

Much has been said about low carbon, rightly so, as it is critical to the future of manufacturing in the area. We will use the money to equip Teesside to become part of our low carbon manufacturing base. We know that low carbon is the future. If we are to succeed, we must have a national low carbon capability. It will include £6 million of support for research and development of bio-based materials, £3 million to undertake engineering design, and £20 million for infrastructure development. We will also support the critical Wilton chemicals cluster; we want to see it continue and prosper as part of the low carbon future.

The Government are committed to the people of the north-east, and wish to help them recover from this decision. I have seen what can happen when whole communities are left on their own. We will not let that happen in this case. Rarely can a Government have moved so fast and on such a scale in response to a closure, but the people of Teesside deserve it. They deserve our help, and we will stand by them in future.