'We won't let them wreck our plant,' Tata's Dutch steelworkers say | Reuters - Firstpost
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'We won't let them wreck our plant,' Tata's Dutch steelworkers say | Reuters

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IJMUIDEN, Netherlands/LONDON With Tata Steel's troubled British operations up for sale, Dutch workers at its only other European site for primary steelmaking are in defensive mood, and yet the plant may have a bright future.

"We won't let them wreck our plant" is their motto, directed at top managers of the Indian-owned group; some of the 9,000 staff at the IJmuiden plant on the Dutch North Sea coast even wear it to work on their safety helmets.

The slogan dates from contract talks last year but shows their defiant spirit during uncertain times for a European steel industry beset by overcapacity and cheap Chinese competition.

More than 11,000 jobs are at risk at Tata's British plants but in the Netherlands, IJmuiden has several advantages - not least that it is excluded from the British sale process and, industrial sources say, it makes a profit.

Tata reported an overall loss for its European steelmaking operations of $90 million for the financial year 2015-16, which analysts said equated to $15 per tonne.

The company won't break down the figures but the British operations - including the country's biggest steelworks in the South Wales town of Port Talbot - are estimated to have lost more than a million pounds ($1.5 million) a day.

By contrast, the industrial sources put IJmuiden's profit margins at about three percent, albeit down from around 30 percent in 2007 at the peak of the steel boom that has since turned into a bust.

Dutch trade union leaders say returns would have been higher if Tata's leaders hadn't diverted investment to Britain, in the hope of correcting a history of poor performance and underinvestment in the steel industry there.

"We're very sorry for the English, but they should have invested here," said Peter Kos, a 65-year-old union official who has been a steelworker at IJmuiden since he was 16.

Tata will not disclose all figures, but a spokesman said it has invested 1.5 billion pounds on upgrading the British plants since it bought the Anglo-Dutch steelmaker Corus in 2007 and "broadly the same across the main European operations".

Another Dutch union official said the bulk should have gone to the Netherlands. "If they had invested the money in IJmuiden, we would have been top of the world," said Aad in 't Veld from the FNV federation.

Notwithstanding such intra-plant rivalries, both Dutch and British workers say Tata has been a good boss, but at least for Britain the investment came too late.

LONDON FINANCIAL ELITE

Problems in the British steel industry long predate Tata's involvement. As state-owned British Steel, it was often starved of investment to modernise plants. Then after privatisation in 1988 it came under different pressures.

According to Peter Joustra, a former managing director at the IJmuiden plant, the British operations fell victim to short-term investment decisions aimed at pleasing shareholders.

By contrast, he says the European model of business helped to protect the Dutch plant, founded in 1918 by the Koninklijke Hoogovens firm, and to ensure a long-term investment strategy focused on innovation.

"The steel industry asks for a long-term orientation - high investments and long construction time for new installations - which does not fit in with the Anglo-Saxon model of the London financial elite," said Joustra, who worked in the industry for 36 years, including at Tata's operations in South Wales, and has written an academic thesis on steel.

British Steel and Hoogovens merged in 1999 to create Corus, the firm Tata bought eight years later after a bidding war that pushed the price up to $12.9 billion.

At the time, China's demand for foreign-made steel seemed almost insatiable but with the economy there now slowing sharply, the flow has turned. Chinese plants are flooding the world market with steel they cannot sell at home.

Today Tata has four European sites for primary steelmaking: Port Talbot, Scunthorpe and Rotherham - among the British plants it wants to sell - and IJmuiden, which lies at the entrance of the North Sea Canal leading to Amsterdam and the European inland waterway system.

On top of that, Tata has secondary plants across Europe that turn the crude steel into products for use in everything from transport and construction to motor manufacturing.

THE BEAUTY OF IJMUIDEN

Tata's British steel operations are scattered over sites across the country. The group also has several plants in the Netherlands, but IJmuiden combines primary and secondary production in one place.

"This is the beauty of the IJmuiden plant – it's a fully integrated plant, they can do everything on that site. Very rarely do they ship stuff outside of the plant to finish it," said Mark Turner, 51, a steelworker and representative of the Unite union at Port Talbot.

On the other hand, Port Talbot's output often has to be transported to other Tata steelworks around Wales to complete the production process, he said.

Analysts agree that IJmuiden's integrated model has been a success, encouraging investment in raising technological and environmental standards.

"This has huge benefits in terms of economies of scale, innovation and sustainability. As a result, it is one of the most sophisticated and cleanest sites in the world," said Gerben Hieminga, a senior economist at ING bank.

Other analysts also place it near the top of European plants and say an experimental project there to reduce carbon emissions and energy use by 20 percent offers potential for yet cleaner, cheaper steel production.

While IJmuiden is not up for sale, it could nevertheless attract interest. Germany's Thyssenkrupp has held exploratory talks with Tata, a source with knowledge of the discussions said at the start of April.

Both companies declined comment at the time but Thyssenkrupp Chief Executive Heinrich Hiesinger has said Germany's biggest steelmaker wants to play a role in any consolidation of the European industry.

German unions have warned they are ready to fight for their jobs but such a tie-up might offer the more secure future that the IJmuiden workers want.

Analysts say the plant is a natural fit with the nearby German market, producing high-grade steel needed there by manufacturers of cars and white goods such as washing machines and fridges. German customers buy the steel in euros, so IJmuiden avoids the exchange rate risk that has hit the British operations whose costs are largely in sterling.

DRAGON'S FIRE

At Port Talbot, the 4,000 workers are uniting behind the symbol of Wales, the red dragon on the principality's flag. "Keep the dragon's fire: save our steel" is their rallying cry.

The British operations have problems of their own, including high energy costs and a shortfall in the pension fund for retired British Steel workers. But again, the complaint is that the other side - in this case the Dutch - got more investment.

"We haven't seen the investment possibly that they have. The most important thing is research and development going forward, to be at the forefront of steel," said Ian Williams, a Port Talbot worker.

Even by 2017, European steel demand is expected to be more than 20 percent lower than it was in 2007, according to figures quoted by the Organisation for Economic Cooperation and Development. Elsewhere in the world, consumption is recovering.

All Europeans face tough competition from the most profitable steel manufacturer that analysts say is in Brazil, a leading iron ore producer. China, meanwhile, has been propping up its plants and selling steel at below cost price to gain market share, European manufacturers say. Britain too could find itself accused of market distortion and unfairly subsidising the steel industry, depending on the terms of any government intervention to persuade private investors to buy the Tata assets.

    At IJmuiden city hall, alderman Ronald Vennik has no doubt where Tata should always have concentrated its efforts. "Maybe it's because I live here, but I think it took too long for the management of Tata to make a rational decision. The rational decision is to stop in Britain," he said.

($1 = 0.6849 pounds)

(additional reporting by Promit Mukherjee in Mumbai, Georgina Prodhan in Frankfurt and Freya Berry in London; editing by David Stamp)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Jun 1, 2016 00:00 IST

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