APPENDIX 4
Supplementary memorandum submitted by
Corus Rail
RAIL MANUFACTURING AT CORUS RAIL, WORKINGTON
Responses to Written Questions from the Trade
and Industry Committee
INTRODUCTION
These written answers have been prepared by
Corus for submission to the Trade & Industry Committee, in
response to certain questions submitted by Mr David Natzler, Clerk
of the Committee, in his letter of 14 December, 2000.
Q1. What information does Corus have on the
extent to which hitherto excluded low cost producers are now "qualified"
to meet European Rail Standards?
A1. A number of low cost producers in Eastern
Europe can broadly meet European Rail Standards. Rail purchasers
establish qualification criteria, and quality assurance regimes
with each individual supplier as part of a given supply contract.
Corus is aware that producers from the former eastern bloc are
supplying into Western European markets.
Q2. It has been alleged to the Committee that
72m rolled rail imported to Teesport from the Corus plant at Hayange
is cut into two sections and subsequently welded together. A comment
would be helpful, if appropriate in the context of the import
of rail of similar length from Vonest Alpine.
A2. A consignment of 72 metre rail was shipped
to Teesport from the French mill in order to prove the logistics
route. This trial was planned in advance of the modification of
Corus Castleton welding plant to receive the 72 metre feedstock,
which was scheduled to come on stream from January 2001.
In November, as a consequence of the emergency
re-railing programme instituted by Railtrack following the Hatfield
incident, it was agreed with Railtrack to delay the modifications
at the Castleton welding plant until after the re-railing programme
was completed. To support the National Rail Recovery Plan, 72
metre rail held at Teesport has been cut down to 36 metre lengths
for processing at the Castleton welding plant.
To date Voest have supplied mainly 36 metre
lengths into the UK, but it is understood that they (and Lucchini
of Italy) will introduce longer as-rolled lengths into the UK
in the new year.
Q3. WHAT
ASSESSMENT HAS
CORUS MADE
OF THE
CURRENT AND
FUTURE (A)
UK AND (B)
CONTINENTAL EUROPEAN
MARKET FOR
SHORT RAIL,
AND HOW
FAR IT
IS PROPOSED
TO SUPPLY
THIS MARKET
FROM HAYANGE?
IT WOULD
ALSO BE
HELPFUL TO
HAVE AN
INDICATION OF
THE CAPACITY
AT HAYANGE
TO PRODUCE
SHORT RAIL?
A3. Mature long rail markets such as Germany
and France source 43 per cent and 40 per cent respectively of
their total rail requirements in short lengths. The UK network,
up until 2001, was supplied exclusively by short rail, and we
expect that the UK will ultimately follow the European trend.
It is worthy of note that the rail requirements
for the Channel Tunnel Rail Link (CTRL) are for a minimum 36 metre
as-rolled lengths, welded into minimum 288 metre strips, delivered
to site. This welded string length is c100m beyond current supply
specifications. Corus has the capability, with some investment
at its welding plant, to supply this requirement from Workington,
and we are tendering on this basis.
Corus is seeking to maximise its share of the
UK rail market leveraging the competitive advantage it possesses
in terms of proximity to the market, speed of response, customer
service and quality. This competitive advantage has been amply
demonstrated by the Company's response to the emergency re-railing
programme. Corus has fully satisfied Railtrack's demand, increasing
rail production for them at Workington more than twofold since
the Hatfield incident.
The standard capacity at Hayange of c 360kt
pa, the balance of long versus short rail production is largely
interchangeable.
Q4. In view of the recent decision to reject
heat treatment of rails, it would be helpful to know what proportion
of the July 2000 estimated costs of an adaptation of the Workington
plant to produce 72 metre rails would be saved if heat treatment
were omitted?
A4. Railtrack have taken the decision to
focus on the installation of non-heat treated rails to meet the
emergency track re-laying programme following the Hatfield crash.
Their position is inconsistent with the practice adopted by railways
world-wide, and Corus is convinced that it is in the best long
term interests of the Workington mill to retain a heat treatment
capability.
Essentially the £47.7 million 72 metre
rail rolling scheme would create a 72 metre rail process route,
and a 36 metre rail process route. The scheme for the 72 metre
rail process route did not include a heat treatment capability,
but the existing heat treatment facility would be retained for
the 36 metre process route. The proportion of costs within the
72 million scheme associated with heat treatment is therefore
not material.
Q5. It would be helpful to have a note on
Corus sales to the US of heat treated short rail, and prospects
in that market, in view of past alleged quality problems?
A5. For most of the past 10 years the US
has been a low price market, with demanding product specifications.
Poor financial returns on US sales led the Workington mill to
focus on other markets. Any reported quality problems have been
of a minor nature, and have not prevented occasional sales during
periods of high US demand when financial returns tend to be more
attractive.
The Mill in Hayange has an established position
in the market and benefits from the current advantageous exchange
rate between the Euro and the Dollar. Historically the Hayange
mill has supplied significant volumes into North America.
Q6. It would be helpful to have a note on
the significance (if any) for Workington and Hayange of the adoption
of Railtrack of the new CEN 60 standard for its premier routes?
A6. This is of no great significance as
the CEN 60 specification rail is currently a commonly produced
section on both the French and UK mills.
5 January 2001
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