Select Committee on Trade and Industry Minutes of Evidence

Memorandum submitted by UK Steel Association (continued)


"If it's not made of steel, its made using steel"

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 happen.

  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 economies).


  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 ISPAT.

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 for steel

  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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 14 March 2001