The Steel Deal

Posted on 16 Apr 2015 by Ruari McCallion

Is the UK steel industry in fine fettle or suffering terminal corrosion? It has changed and is changing, and there is life in it yet, Ruari McCallion reports.

Tata Steel - Llanwern OutputTo paraphrase Mark Twain, reports of the death of the UK steel industry have been somewhat exaggerated. To many outside observers – and even to people involved in manufacturing – the toppling of the towers at Ravenscraig, Llanwern and Ebbw Vale symbolised the end of the industry, but the UK has a history of innovation, which has enabled production to continue.

The peak of production in the past 25 years was 1997, when output from UK mills exceeded 18 million tonnes, according to EEF. More recently, 2007’s output was 14.4 million tonnes, before the banking-led recession.

Since the all-time low of 9.5 million tonnes in 2011, we have seen an upward trend once again, with output exceeding 12 million ingot tonnes in 2014, according to John Brierley, past president of the National Association of Steel Distributors; board member of the Steel Association, and a non-executive director of Brown McFarlane.

UK steel demand is stronger than in the rest of Europe and is now only 10% below the 2008 peak. Growth continues across the world, although less so in the developed markets.

Steel growing

Steel Rolls
Carbon taxes add at least 10% to steel production costs.

“Excluding 2008/9, the annual growth of steel is still running at 4 – 5 % per annum compound,”

Brierley said. “One of the key indicators [of future demand] is the use of steel per capita. Usage in the emerging economies, including China, India and Brazil, is much less than in the mature markets in Europe and North America, so we are still seeing growth.”

A big barrier in the way of expanded primary steel production in the UK and EU is environmental legislation; carbon taxes add at least 10% to production costs.

“China and India make around half the world’s steel; there isn’t as much concern there about pollution,” he continued. “The cost of moving something 80-90 miles across land is about equivalent to bringing it in simple bulk cargo ships from China.”

If there is no transport advantage then it looks very much as if primary production has a limited future in the UK.

“Tata Steel [which owns most of steel capacity in the UK] has a lot of capacity in India. I expect the UK’s production will be focused on rolling and finishing,” he said.

Tata Steel has two integrated sites in the UK – at Scunthorpe and Port Talbot – and a third in Ijmuiden, Netherlands. Port Talbot makes slab; hot rolled; cold rolled, and galvanised coil. Scunthorpe produces bloom; billet and slab; medium sections; rail; wire rod, and plate.

Tata Port Talbot works blast furnace.
Tata Port Talbot works blast furnace.

The company’s third UK plant, on Teesside, was mothballed in 2009 and then sold to Sahaviriya Steel Industries (SSI) of Thailand in 2011. After a multi-million pound refurbishment programme, including the relining of the blast furnace, it officially reopened in April 2012 and now produces billets that are sent to its downstream rolling plants in Thailand.

Steel crazy, after all these years

Tata’s other facilities in the UK range from an R&D facility near Middlesbrough, Teesside, to narrow strip and bright bar in the West Midlands, in Walsall and Wednesbury, respectively.

Spectators who attended the Ryder Cup 2010 in Newport, South Wales, parked near and were transported past the Llanwern site, which is made up of a hot strip mill, a cold strip mill and a hot dip galvanising line.

It rolls 1.5 million tonnes of steel coil per annum for automotive, construction and general engineering applications. Grain-oriented electrical sheet (GOES) is made at the nearby Orb works.

Further west, golfers at Machynys, near Llanelli, cannot miss the Trostre works that makes tinplate and other packaging steels. The Tata name is also emblazoned across plants at Shotton,  North Wales (galvanised coil); Motherwell, Scotland (steel plate and quenched material); Teesside (heavy sections at the Teesside Beam Mill and steel tubes at Hartlepool); Rotherham (engineering steel), and Corby (steel tubes).

Bright ideas: making it in the UK

The UK steel industry’s strength is innovation and added value – 

Ruuki UK Ltd makes special steels including Expression™ and Form™ building façade systems and other construction-grade steels, as well as Optim 700 QL1extra high-strength, quenched and tempered (Q), low-temperature tough (L) structural steels. SSAB, its parent, is a leader in  UHSS for the auto industry and other applications.

Caparo plc’s activities in the UK include Caparo Wire; Ductile Stourbridge Cold Mills; Firth Cleveland Steel Strip, and JB & S Lees in its Speciality Steels division.

Sheffield Forgemasters specialises in large bespoke castings and forgings as well as standard rolls, ingots and bar. It recently received £36m support from the Regional Growth Fund for a variety of equipment in the melt shop, forge and machine shops

Special Metals Wiggin, in Hereford, invented Inconel high-strength, highly corrosion resistant and very light nickel-chromium alloy. It offers nickel and cobalt alloys in a range of forms to aerospace, auto, marine, chemical and other industries.

Swann-Morton Ltd, in Sheffield, is a world leader in surgical equipment. Its product range extends to around 70 individual blades shapes and 30 different handles.

Sheffield. The traditional home of the steel industry now produces more steel by value than ever and the area is responsible for around 10% of the UK’s total steel output. A recent innovation is Carr’s Lustre Silver, described as a ‘stainless silver’ alloy that resists tarnishing and can be easily worked.

Clearly, Great Britain retains a significant capacity for steelmaking – but what is it used for?

“The auto sector is the biggest user of steel in the UK, followed by construction and mechanical equipment,” said Brierley. The importance of the auto industry is perhaps paradoxical, as Tata-owned Jaguar Land Rover (JLR) has switched to all-aluminium construction of its vehicles.

“JLR’s choice is very much about lightness and it’s the only one to have gone down that route,” he explained. “Steel is still the cheaper material to make cars from. You can’t weld aluminium and steel is more malleable.”

The development of special steels, such as HSS and UHSS (high strength and ultra-high strength steels) have helped in the drive for lighter, stronger materials.

Rust never sleeps – but it can be sedated

“Mild steel has a tensile strength of 250Nm (Newtons/metre2). HSS is three times that and you will find it in critical areas of the car that need high-strength materials, in crash and crumple zones,” Brierley continued.

But steel also wants to corrode and crumble, as fast as it can. Improved galvanising methods and the development of duplex steels have changed the picture somewhat, but demand for steel has been healthy not just because of the auto sector; construction is a major customer and the pickup in that industry has fed back through to busy mills.

“Bridges and high-rise buildings tend to be made significantly of steel in the UK, but of high stressed concrete elsewhere in Europe,” he maintained. “People build in steel for the long term – just look at the Forth Bridge.”

He has a point. Regular painting has kept the iconic railway bridge functioning to high standards for 125 years, while the road bridge is showing the strain after less than half that time.

However, the demand from the North Sea oil and gas industry has essentially been satisfied but there is a legacy; the innovations and developments from that challenging environment can be applied to other industries.

For example Brown McFarlane, Brierley’s company, specialises in super duplex steel. It offers high corrosion resistance, high resistance to corrosion cracking, and high yield strength and tensile strength.

Sheffield Forgemasters 2
Clearly, Great Britain retains a significant capacity for steelmaking.

It is used in flow lines; risers; process vessels; separators; coolers; manifolds, and process piping in offshore applications; and in heat exchangers, boilers, and pressure vessels in petrochemical and chemical processing plant.

Do renewables offer the same opportunities as have been enjoyed in conventional energy?

Time and tide

“Wind farms have probably reached their zenith,” said Brierley. Solar relies on plastics. The opportunity he sees in renewables is in tidal energy, which is reliable, very powerful and has a characteristic that is very close to his heart of steel.

“Tidal power plants use a considerable amount of steel. They’re like wind turbines under the sea but obviously less visible. The challenges include corrosion, because they are located in salt water. You can protect the steel but wherever you have a moving part, sealing is a challenge.”

But these challenges can be overcome, as the history of the North Sea proves – and as the existing tidal barrages at Rance, in Brittanny, and Strangford Lough, Northern Ireland, demonstrate.

Rance is a 240MW station; the proposed barrage in Swansea Bay, South Wales, would be around the same and the mooted Severn Estuary project would produce about 40 times as much – around the same as the UK’s total current onshore wind-power capacity.

Steel PQThe 10.5MW Skerries Tidal Farm in North Wales was given support by the Welsh Assembly in February 2013 and received planning permission in 2014. It’s hoped that it will be generating in 2016.

It is not easy to make money in steel in 2015 and exploitation of future opportunities will continue to rely on innovation and development. The Carbon Tax and other environmental legislation will not go away; Ravenscraig and Ebbw Vale are not coming back.

Companies that rely on making steel that sells for £50/tonne will struggle; far better to go into advanced steels, special applications, UHSS or super-duplex, especially as the latter sells for closer to £900/tonne.

Better and faster

Look carefully to make more effectively

The cycle time of industrial process will always be governed by the pace of its slowest component but the trick is to look in the right place.

Hugh Williams, managing director, Hughenden Consulting
Hugh Williams, managing director, Hughenden Consulting.

The general belief is that “capacity is king” and the tendency is to focus on where the money has been spent – on the big pieces of kit.

“When we looked at the real flow, we better understood the real constraints and bottlenecks,” said Hugh Williams, managing director of Hughenden Consulting, which is based in High Wycombe.

He was talking specifically about his experiences with three steel companies with whom he has worked in the past 20 years. All had different lead times; one worked on a monthly cycle and found that it could cut it by 75% – to just one week.

“It’s about understanding how each piece of plant worked,” Hughenden said. The normal practice was to set things up and, when they ran well, to keep going. “The reality was that there was a fight between what production thought was good and what the customer wanted.”

He worked with Ruuki in Solihull, West Midlands, which had a three-day lead time for a particular range of special steels.

“That looked very good but the material was actually worked on for only three hours. The rest of the time was spent waiting,” he explained.

Over no less than 32 different projects, guided by the Theory of Constraints, lead time was driven down to 24 hours.

“Companies rightly invest in plant that can give better quality but that isn’t the solution to flow problems,” said Hughenden. “You must look at the whole value chain and away from the ‘prime plant’ mentality. It isn’t simply about keeping the machines busy.”