Thursday, October 29, 2015
There is no case for keeping steel production open in Redcar
In the modern world the trading of commodities is international and even bulky items like steel can be transported over large distances economically. This means that the global market will be dominated by the suppliers with the lowest production costs who can as a result offer the lowest prices. 'Twas ever thus. The decline in textile manufacturing in the UK (for example) was because others in lower labour cost countries could offer lower costs. And with free trade and the removal of tariff barriers there is nothing we could do about it, and didn't.
So is steel production in Redcar (etc.) a lost cause? Almost certainly. Should the British government subsidise British steel to keep plants open? The only instance where this might be justifiable would be if the present steel market conditions were temporary and some sort of bridging arrangement was necessary. The does not appear to be the case.
The closure of the mines in the 1980s was crassly and insensitively handled, but the strategy was right. The UK could not compete with lower cost coal producers and the energy sector was moving away from coal anyway. There is a parallel with the current state of affairs in steel. The U.K. can be a niche producer of added value steel products, but not a competitive producer of commodity steel. So Government's task is not to shore up unviable plants but to find a way of softening the blow for those thrown out of work. It's a tough conclusion but there is no other one.