FUTURE CAPACITIES AND CAPABILITIES OF THE UK STEEL INDUSTRY BEIS Research Paper Number 26 Technical Appendices 15 December 2017 This study was conducted by a Grant Thornton UK LLP-led consortium including Hatch Consulting and the Materials Processing Institute. The consortium received support from a steering board containing representatives from the UK steel sector, including: British Steel, Celsa Steel UK, Liberty Steel, Tata Steel UK and UK Steel (the trade association for the UK steel industry). The views expressed in this report are those of the organisations interviewed as part of this research and the Grant Thornton UK LLP-led consortium; they are not necessarily the views of BEIS. We would like to thank the UK steel producers and the many people and organisations who contributed to this study. Their invaluable participation and feedback throughout the project helped ensure that this was a comprehensive undertaking and provides a robust assessment of the future capacities and capabilities of the UK steel industry. 1 Table of Contents 1. Appendix 1: Approach & Methodology _____________________________________ 7 Introduction 7 Q1 Methodology – Historical Demand 8 Q2 Methodology – Sector View 12 Q2 Methodology – Demand Forecast 17 Q3 Methodology – Barriers Analysis 20 2. Appendix 2: Macro View of the UK Steel Industry ___________________________ 25 Introduction __________________________________________________________ 25 True Steel Demand and Finished Steel Demand 27 3. Appendix 3: Sector Analysis ___________________________________________ 41 a.) Introduction _____________________________________________________ 41 b.) Summary _______________________________________________________ 42 Summary of Finished Steel Demand 42 Summary – Historical Demand 44 Summary – Demand Forecast 47 Opportunities for UK Steel Industry 50 c.) Construction_____________________________________________________ 51 Construction – Demand Forecast 55 Construction – Sector View 60 d.) Automotive ______________________________________________________ 77 Automotive – Historical Demand 77 Automotive – Demand Forecast 79 Automotive – Sector View 85 e.) Oil & Gas _______________________________________________________ 91 Oil & Gas – Historical Demand 91 Oil & Gas – Demand Forecast 92 Oil & Gas – Sector View 95 f.) Machinery & Engineering ___________________________________________ 98 Machinery & Engineering – Historical Demand 98 Machinery & Engineering – Demand Forecast 99 g.) Packaging _____________________________________________________ 101 Packaging – Historical Demand 101 2 Packaging – Demand Forecast 102 h.) Yellow Goods___________________________________________________ 102 Yellow Goods – Historical Demand 102 Yellow Goods – Demand Forecast 103 i.) Rail __________________________________________________________ 106 Rail – Historical Demand 106 Rail – Demand Forecast 106 Rail – Sector View 107 j.) Nuclear _______________________________________________________ 110 Introduction 110 Nuclear – Sector View 111 k.) Aerospace _____________________________________________________ 113 Introduction 113 Aerospace – Sector View 113 l.) Renewable Energy ______________________________________________ 117 Introduction 117 Renewable Energy – Sector View 118 m.) Conclusions ____________________________________________________ 123 Conclusions – Historical Demand 123 Conclusions – Demand Forecast 123 4. Appendix 4: Product Analysis _________________________________________ 125 a.) Introduction ____________________________________________________ 125 b.) Summary ______________________________________________________ 125 Summary – Historical Demand 125 Summary – Demand Forecast 128 c.) Rebars ________________________________________________________ 132 Rebar – Historical Demand 132 Rebar – Demand Forecast 135 Rebar – Sector View 137 d.) Wire Rods _____________________________________________________ 139 Wire Rods – Historical Demand 139 Demand Outlook 142 Sector Outlook 143 Wire Rods – Sector View 145 e.) Merchant Bars __________________________________________________ 147 Merchant Bars – Historical Demand 147 3 Merchant Bars – Demand Forecast 149 Merchant Bars – Sector View 151 f.) Engineering Steels _______________________________________________ 152 Engineering Steels – Historical Demand 152 Engineering Steels – Demand Forecast 155 Engineering Steels – Sector View 157 g.) Rails __________________________________________________________ 159 Rails – Historical Demand 159 Rails – Demand Forecast 161 Rails – Sector View 163 h.) Open Die Forgings _______________________________________________ 165 Open Die Forgings – Historical Demand 165 Open Die Forgings – Demand Forecast 166 i.) Sections _______________________________________________________ 169 Light Sections – Historical Demand 169 Light Sections – Demand Forecast 171 Medium Sections – Historical Demand 172 Medium Sections – Demand Forecast 175 Heavy Sections – Historical Demand 178 Heavy Sections – Demand Forecast 181 Sections – Sector View 184 j.) Plates _________________________________________________________ 187 Plates – Historical Demand 187 Plates – Demand Forecast 190 Plates – Sector View 193 k.) Hot Rolled Coils _________________________________________________ 197 Hot Rolled Coils – Historical Demand 197 Hot Rolled Coils – Demand Forecast 201 Hot Rolled Coils – Sector View 205 l.) Cold Rolled Coils ________________________________________________ 208 Cold Rolled Coils – Historical Demand 208 Cold Rolled Coils – Demand Forecast 211 Cold Rolled Coils – Sector View 214 m.) Coated Products ________________________________________________ 217 Coated Products – Historical Demand 217 Coated Products – Demand Forecast 221 4 Coated Products – Sector View 224 n.) Organically Coated Sheets (OCS) ___________________________________ 227 o.) Tinplate _______________________________________________________ 230 Tinplate – Historical Demand 230 Tinplate – Demand Forecast 232 Tinplate – Sector View 233 p.) Seamless Tubes ________________________________________________ 235 Seamless Tubes – Historical Demand 235 Seamless Tubes – Demand Forecast 237 Seamless Tubes – Sector View 238 q.) Stainless Steel __________________________________________________ 240 Stainless Steel – Historical Demand 240 Stainless Steel – Demand Forecast 242 Stainless Steel – Sector View 243 r.) Value Analysis __________________________________________________ 244 Value Analysis – Historical Demand 244 s.) Conclusions ____________________________________________________ 245 Conclusions – Historical Demand 245 Conclusions – Demand Forecast 247 5. Appendix 5: Barriers Analysis _________________________________________ 249 Introduction _________________________________________________________ 249 Cross-cutting Barriers _________________________________________________ 249 Investment Capability 249 Supply Chain Capability 249 Research & Development 250 Skills 250 Barriers Analysis – Product-by-Product Barriers ____________________________ 251 Long Products (Rail, Sections, Merchant Bar, Engineering Steel, Rebar & Wire Rods) 251 Flat Products (Plates, Hot & Cod Rolled Coils, Coated Products [Metallic & Organic Coated Sheet], Tinplate) 263 Other Products (Stainless Steel, Open Die Forgings & Seamless Tubes) 271 6. Appendix 6: Interview Allocation _______________________________________ 276 Interview Allocation Across Sectors & Actual Interviews Held 276 Supply Chain Maps 277 7. Appendix 7: Topic Guide _____________________________________________ 279 Introduction 279 5 Construction Topic Guide 279 Automotive Topic Guide 285 8. Appendix 8: Analysis of Capacity and Capability Barriers ____________________ 291 Introduction 291 6 Appendix 1: Approach & Methodology 1. Appendix 1: Approach & Methodology Introduction Overall introduction The dynamics of the global steel industry have changed significantly in recent years. From the peak reached in 2011 to the start of 2016, the price of steel has more than halved, with contributing factors including overcapacity at a global level, weaker demand in Europe and expanded supply from China. The steel industry in the UK is already under significant pressure from these forces – as demonstrated by the closure of SSI UK’s Redcar steelworks in 2015. The UK Steel Council – comprising UK government, devolved administrations, industry, unions and trade associations – aims to consider how industry and government can strengthen the capability and competitiveness of the UK steel sector. A number of ‘asks’ have already been delivered on energy costs, guidelines on public procurement of steel, environmental regulations and trade measures. The UK Steel Council identified a further ask of government to: Comprehensively map the current capability of the UK sector, identify the future opportunities for steel products in new and existing sectors and markets, and examine how to overcome potential challenges or barriers preventing industry from diversifying and meeting future demand. In direct response to this ask, the Department for Business, Energy and Industrial Strategy (BEIS) commissioned a consortium led by Grant Thornton and including Hatch Consulting and the Materials Processing Institute to undertake this research. The research revolved around three broad questions: Question 1 – What is the current capability of the UK steel sector? Question 2 – What is the future of UK steel demand by product and consuming sector? Question 3 – What are the barriers that prevent the UK steel sector in its current state from having the