Memorandum submitted by UK Steel Association
"If it's not made of steel, its made using
Everything we use in everyday life is either made
from steel or using steel. Whether it is bolts or buildings, clothes
or chemicals, food or fast cars, lamps or lemonade, all depend
on steel at some point. Even industries producing other materials
like glass, aluminium and plastics, all need steel. We depend
on steel for housing and health. Without it there would be no
offices or retail parks. It is at the root of the quality of life
that each of use enjoys today, helping to shelter us, to feed
us and to facilitate both our working and our leisure day.
The steel industry's customers are the companies
and industries that produce these goods or make these buildings
Trends that affect those customers place extra
demands on steel companies as suppliers, further adding to the
dynamics of change within the industry. (The UK steel industry's
main customers are a typical example of main steel-using industries).
Construction demand for steel, the industry's
biggest "customer", is strongly influenced by national
governments' plans and the status of the economy (eg developing
countries will tend to use less steel than newly industrialising
However, the biggest phenomenon influencing
the steel industry and its plans for the future is globalisation.
How is it going to develop over the next five to 10 years, let
alone the next 30, which is more in line with a steel investment
cycle? What should the steel industry's response to this be?
The automotive sector is the best known example
of globalisation, with the six largest groups now accounting for
70 per cent of world car production. In aerospace two companies,
Boeing and European Airbus Industries account for the majority
of civil airliner production.
By contrast, steel is still a relatively fragmented
industry, with the top 20 companies only accounting for 37 per
cent of world-wide steel production. So far, the best known example
of a steel company with a global "presence" is London-based
General world outlook to 2005
The International Iron and Steel Institute forecasts
continued consumption growth of 0.5 per cent per annum over the
next five years. Highest increases over the period are expected
in South America (5 per cent per annum) and China (3.8 per cent
per annum). European and North American levels are forecast to
grow modestly by less than 1 per cent per annum.
Further industry consolidation is to be expected
as steel responds to the requirements of its globalising customers.
Steel company shares across the world have all taken serious knocks
in the last 12 months. While this makes steel companies vulnerable
to take-over, it also encourages complete or partial mergers (viz
Posco and Nippon Steel) to protect the value of the physical asset
base, as competing companies continue to develop their strategies
for more efficient production and supply.
As economies develop they increase their requirements
Steel consumption per capita is indicative of
a country's manufacturing strength. In general terms, the higher
the steel intensity, the greater that economy's capacity to produce
and export manufactured goods.
Comparison of different countries' steel consumption
per capita US$ GDP indicates broadly the economy's reliance on
manufacturing and construction for wealth creation.