What is Happening in the Steel Industry?
The steel industry in the UK is in crisis: 1,200 jobs will be lost at three Tata steel plants in Scunthorpe, and Motherwell and Cambuslang in Scotland. This is on top of 2,000 jobs lost at an SSI plant in Redcar. Meanwhile, Caparo Industries, a steel products company based in the West Midlands, has also announced that it will go into administration, affecting 1,700 employees.
Aside from the jobs lost, this undermines the character of the communities built on steel. Scotland will lose the last remnants of its 150-year old steel industry. Motherwell, already decimated by the loss of the Ravenscraig plant, will lose the last link to the industry that defined it for generations.
In the meantime, a new crossing is being built over the River Forth in Scotland, using Chinese steel – because no UK company bid for the supply contract.
But it is not just the UK that is affected: in the US, 9,000 steelworkers will lose their jobs this year.
What’s going on?
Part of the story is explained by globalisation, and the shift in the economies of developing countries, from manufacturing to services. The UK does not manufacture as much as it did in the past, which means the country does not use as much steel.
It is difficult for the UK to export its excess steel, despite strong demand around the world, because of the strength of the pound. This makes British steel expensive on the world market.
Also, demand for new steel drops as countries become more developed, making steel plants less viable: developed economies are able to recycle steel, for instance from scrapped cars.
But there is more going on here than technological change and a gradual economic shift. Steelworkers around the world are feeling the pressure – not just in developed economies.
The job losses in the UK and US are put into perspective by the 190,000 workers at risk in the South African steel industry. 10,000 workers will lose their jobs in the next six months, but many more are threatened by the potential collapse of the industry in South Africa.
Unlike the UK, South Africa has a thriving industrial sector. It exports cars, white goods and components to the rest of Africa, and further afield. There is a massive demand for steel. So why is the industry in crisis?
Why is this happening now?
The immediate, short-term answer is that there is an massive glut – an over-supply – on the world market. The reason for this is the economic slowdown in China as that country approaches economic crisis. In what The Economist calls ‘The Great Fall of China’, the Chinese economy is facing a collapse that could derail the rest of the world.
China has a massive, state-supported steel industry – but a slowing economy means there is less domestic demand, and so China is flooding the world market with its excess capacity of cheap, subsidised steel.
Other steel producers, operating in unsubsidised industries and subject to market forces, can’t compete.
Rentier capitalism
The steel crisis is ultimately one of political and economic policy. Western governments follow a neoliberal ideology that claims intervention in the market is wrong, while surreptitiously supporting some industries. It’s a policy decision to shift economic support from manufacturing to services – particularly banking.
The main engine of growth in the UK is an unsustainable property bubble and a financial services industry that essentially launders the ill-gotten gains of the world’s oligarchs. Instead of producing useful products to sell, advanced economies make their money by practicing rentier capitalism.
Rich countries make money by owning things – physical and intellectual property – and setting global standards the rest of the world must adhere to. This also means an economic shift within these countries, away from well-paid, secure, skilled jobs in industry to a precarious, service-based economy.
This, along with the “new sharing” economy, is turning much of the workforce into technologically-enabled, freelance servants to the rich.
The UK government fetishises the free market. It claims that the state should not interfere in the market, and it will not support the steel industry. It is trying to privatise the parts of the economy – such as the health service – that remain in public hands.
Ironically, many of the tenders to run services in the UK are won by companies owned by other governments, allowing foreign states to own and run vital infrastructure, from the rail network to nuclear power stations. Somehow, we are expected to believe that the British state is uniquely incapable of running an industry.
We need to win the political argument about state intervention in the market, and long-term economic planning. We need to argue for an industrial strategy that links upcoming infrastructure projects to the local supply chain.
There are signs that this is beginning to happen in Scotland. The Scottish government has at least pledged to try to save the remaining steel industry, while senior Tories believe “this is a good time for steelworkers to lose jobs”. Scottish government-owned CalMac awarded a £97 million contract to produce ferries to a local shipbuilder, saving it from closure.
While this is encouraging, it is piecemeal and reactive. We need explicit industrial policy that favours quality, local jobs. Unfortunately, many of these provisions fall foul of EU legislation. This is something those in the UK will need to challenge during the debates about continued membership.
In South Africa, metal workers’ union NUMSA went on strike to demand that the government use local steel in infrastructure projects. This is a demand unions should make everywhere.
Commenting on the loss of steel jobs in the UK, Fernando Lopes, the assistant general secretary of the steelworkers’ international, IndustriAll, said:
“Whole communities will be destroyed by these job losses. We urge the government do everything in its power to defend the British steel industry as it struggles to compete with cheap Chinese steel being dumped in Europe. The British government must support the steel industry during this time of difficulty rather than stand by and let it die.”
Lopes is right. Our industrial policy should support our jobs and our communities.
Originally from South Africa, Walton Pantland works for Union Solidarity International in Glasgow, Scotland.