Workington and long rolled rail
66. It is questionable whether British Steel/Corus
could conveniently have adapted Workington to produce longer rails
had they wished to. Corus suggested that they were constrained
from doing so by the costs involved. Sir Brian Moffat even suggested
that it was impossible because of the nature of the site.[139]
The company instituted an appraisal in 2000 of the capital costs
of the investment necessary to produce 72 metre long rolled rail
at Workington. They provided us in confidence with the detailed
results, which suggest a cost of around £48 million. This
mirrors the results of the similar exercise conducted in the mid-1990s.
67. The estimated costs of adapting Workington includes
the cost of heat-treating rails, which makes them harder but possibly
also more brittle. Railtrack have decided not to use any mill
heat treatment rail pending investigations following the Hatfield
incident, a practice which Corus describe as "inconsistent
with the practice adopted by railways worldwide". Corus told
us that in any event the outline plans for a 72 metre scheme at
Workington did not include a heat treatment capability.[140]
68. It is of course a matter for judgement whether
British Rail in the mid-1990s or Corus now should have made an
investment in Workington to equip the plant to produce the longer
lengths of rail which its principal customer wanted. It may be
that the judgement was made that Railtrack alone would not provide
a sufficient customer base for long rail and that exports of long
rail to the continental Europe seemed improbable. We are however
surprised that —
- Corus could find £83 million to acquire
a French plant, but not £50 million to invest in a UK plant;
- that it has proved practical to import French-produced
long rail through Teessport but would not have proved possible
to export long rail from a UK source through a similar route;
- that Corus should accept that Railtrack should
be switching to Italian and Austrian steel, without making a vigorous
effort to protect its domestic market in a sector where the logistical
difficulties of importing should give the domestic incumbent supplier
a natural advantage.
Bearing in mind the likely changes noted in the
mid-1990s in the probable demand for long rail, we are surprised
at the decision by British Steel not to invest in conversion of
the Workington plant to long rolled rail in the 1990s, when it
was making substantial profits. The purchase by Corus of the Hayange
long rail plant in France in 1999, in response to Railtrack's
express requirement for longer lengths of rolled rail, was the
consequence of that earlier misjudgement, resulting in the company
spending at least £83 million in acquiring a French plant
rather than investing £50 million in the Workington facility.
Workington prospects
69. There is continuing demand from Railtrack and
from other customers for shorter lengths of rail. In the short
term, as a result of the post-Hatfield renewal programme, UK demand
for short rail is buoyant. Rail production at Workington has increased
substantially as a result.[141]
Indeed, Corus told us that the modifications proposed at the Castleton
welding plant to enable it to weld 72 metre lengths— modifications
which Railtrack told us had been a condition of the new contract—
are being delayed so as to enable Corus to meet the demands of
the emergency re-railing programme. 72 metre rail from Hayange
has even been cut into shorter lengths for welding at Castleton.[142]
Sir Brian Moffat referred to " a total reversal of a market
through an accident".[143]
70. In the medium to longer term, however, prospects
look less bright. Even future UK short rail sales would be liable
to competition from other suppliers, all the more as lower levels
of production with fixed overheads at Workington will make the
plant less competitive. Some other European railways still use
shorter rail; but Corus may seek to supply that market from their
plant at Hayange in France, which enjoys some logistical advantage
for deliveries in some parts of continental Europe. We have been
told that Hayange is indeed producing a great deal of short rail
for the continental European market. There is also a strong possibility
that lower cost suppliers will soon be able to produce rail steel
of sufficient quality to take that relatively small proportion
of national markets in western Europe which are not in practice
the preserve of the domestic producer. Hayange also has "an
established position " in the US market and has historically
supplied " significant volumes" to North America.[144]
There may be a role for Workington as a niche producer of high
quality medium-cost producer of short rails and sleepers predominantly
for export to continental Europe, including eastern Europe, to
North Africa and the Middle East, including Turkey, and to the
USA. The opportunities for Workington are slight, unless Corus
were to make it plain that its short rail deliveries were to be
from there rather than Hayange.
71. It is of course for the owners of Corus to decide
if there is a future for Workington. We find it hard to believe
that there is the will to make the investment now in long rail
facilities, since the company has the Hayange plant. We urge
Corus to consider making Workington the company centre of excellence
in short rail and sleeper production for the domestic and international
market. We also urge Railtrack to give proper weight to the advantages
of having a viable domestic rail producer close at hand when considering
its future policy on ordering.
123 Ev, p 78, A1 Back
124 For
details, see Ev, pp 74-77 Back
125 ibid,
para 6 Back
126 For
details, see pp 79-80 Back
127 ibid Back
128 Ev,
p 78, A2 Back
129 Ev,
p 76, (c) Back
130 Eg
Ev, p 79, (d) (ii) Back
131 ibid Back
132 ibid,
p 76, para 15 Back
133 ibid,
paras 7ff Back
134 ibid,
p 78, A3 and p 76, para 13 Back
135 Eg
Ev, p 76, para 14 Back
136 Ev,
p 79, (b) Back
137 Ev,
pp 80-1 Back
138 Ev,
p 76, para 17 Back
139 Q
190 Back
140 Ev,
p 78, A4 Back
141 Ev,
p 77, para 22 and p 78, A3 Back
142 ibid,
A2 Back
143 Q
186 Back
144 Ev,
p 78, A5 Back
