COM(79)597 Final COMMISSION Brussels , 5Th November 1979 of the EUROPEAN COMMUNITIES for OFFICIAL USE ONLY
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COM (79) 597
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Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 concernant l'ouverture au public des archives historiques de la Communauté économique européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 (JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit règlement.
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 concerning the opening to the public of the historical archives of the European Economic Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1. Februar 1983 über die Freigabe der historischen Archive der Europäischen Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983, S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. September 2003 (ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5 der genannten Verordnung freigegeben. COM(79)597 final COMMISSION Brussels , 5th November 1979 OF THE EUROPEAN COMMUNITIES FOR OFFICIAL USE ONLY
General Secretariat
REQUEST FOR ASSENT, PURSUANT TO ARTICLE 56.2a OF THE ECSC TREATY TO GRANTING A RECONVERSION LOAN TO
" NATURAL GAS TUBES LIMITED " ( UNITED KINGDOM )
( Communication from the Commission to the Council )
COM (79 ) 597 final COMMISSION OF THE EUROPEAN COMMUNITIES
INTERNAL DOCUMENT
COMMUNICATION TO THE COUNCIL
Subject : Request for assent , pursuant to Article 56.2a of the ECSC Treaty to granting a reconversion loan to Natural Gas Tubes Limited ( United Kingdom ).
I. ESSENTIAL INFORMATION
Appli cant : Natural Gas Tubes Ltd .
Beneficiary : Natural Gas Tubes Ltd .
Project : Expansion of capacity for manufacturing ERW tubes ( new small ERW mill and extension to the existing factory)
Location : Tafarnaubach , Ebbw Vale . South Wales
Investment : t 1 , 290,000 Loan requested : t 645,000 (+ 1,029,000 EUA )
Jobs created : 60
Interest reduction : 30,870 EUA per year for five years .
H. CONFORMITY WITH ARTICLE 56 OF THE ECSC TREATY The project is located at Tredegar in the Ebbw Vale Travel to Work Area which is coterminous with the Blaenau Gwent District . The whole of Blaenau Gwent is a Special Development Area for the purposes of United Kingdom regional policy/ and a National Priority Area for the European Development Fund . It has been traditionally dependent upon coal and steel and despite the decline over recent years steel and coal accounted for over one third of the total employment in 1976 . Recently, steel making at Ebbw Vale has been discontinued and the closure of the heavy end of the Ebbw Vale steel plant has led to a very substantial loss of jobs in the area .
./.
Provisional oddress : Rue de la Loi 200 . B– 1040 Brus sel s – Téléphoné 35 00 40-35 80 40 – Télégraphie address : « COMEUR Brussels t – Telex : . COMEURBRU 21 877 . - 2 -
Latest available figures show that the unemployment rate for Blaenau Gwent is 11.4% . These figures are considerably higher than the Wales rate at 7.3% . The pattern of unemployment for the area has been consistently higher espe cially among males than the rate for Wales and the priority is to reduce the rate of unemployment and to provide new opportunities for increases in activity rates . This new project is expected to make a useful though small contribution to achieving this objective .
III . THE UNDERTAKING
Description : Natural Gas Tubes Limited
Legal status : Limited Liability Company
Established : 1966
Registered capital b 1,010,000 Nature of business Manufacturers of ERW and Spiral Weld Tubes at Tafarnaubach ( S. Wales ) and Huntington
Previous ECSC loans : b 950,000 in 1976 b 136,000 in 1976
Parent Company : Caparo Group Ltd .
The applicant is among the firms which have moved to Tafarnaubach Industrial Estate to utilise part of the workforce being made redundant by the BSC closures at Ebbw Vale .
In 1976 the Community granted a loan of b 950,000 to enable NGT to build a new factory and tube mill which would provide 120 new jobs . The new mill made longitudinally welded tubes by the electric resistance weld method ( ERW ) in the size range 60.3 mm - 193.7 mm 0D , together with a range of square, rectangular and circular structural hollow sections . The ERW mill commenced sales in Apri I 1977 .
Also in 1976 the Community granted a loan of b 136,000 towards the purchase of a new 250 mm to 1270 mm O.D. Spiral Weld Mill to be installed at the existing factory . The employment effect of this project was 18 new jobs . The new spiral mill was commissioned in November 1978 and commenced deliveries in February 1979 .
NGT is now planning to expand its capacity for manufacturing ERW tubes by installing a new small ERW tubes mill and extending the existing factory to provide for additional storage space . The expansion will result in the creation of an estimated number of 21 jobs in the first year rising to 60 jobs after 3 years .
IV . THE PROJECT
The project plans provide for :
( 1 ) An extension of 54,000 sq . ft . to the existing 100,000 sq.ft . factory . The new space will be used for storage of ERW tubes and hollow sections from both the old and the new ERW mill .
( 2 ) A new ERW tubes mill which will produce circular, square and rectangular ho' low sections from steel grade 43 c for use in the structural steel market Ci rcular Square and Rectangular 21.3 mm O.D. to 76.1 mm O.D. 20 x 20 mm to 60 x 60 mm Halt Thickness
1„3 mm to 4.2 mm. The new mill will also produce pressure tube in the diameter range 21.3 mm to 76.1 mm , principally in the basic commercial grade known as "gas list " to specification BS 1387 . These tubes will be mainly sold with plain ends in self-colour or varnished finish but NGT does have arrangements with outside subcontractors to supply galvanised finish if necessary . A small amount of gas list tubes will be supplied with screwed ends . Gas list tubes are used for low pressure transport of air, steam, gas and water and also for light structural steel purposes such as harvdrailing and fencing .
The theoretical capacity of the new mill on a three shift basis with an average product range is about 18,000 tonnes p. a . but NGT is unlikely to reach this level of output until at least the third year . The production levels based on the sales forecasts are :
Tonnes p. a .
1980 1981 1982
Hollow sections 3,000 7,000 10,000
BS 1387 Gas List 3,000 5,000 8,000
6,000 12,000 18,000
The estimated capital cost total * b 1,290,000 Bui Idings b 426,000
Plant and machinery b 754.000
Other b 110,000
The new mill will occupy space which is presently used for storage of finished tubes from the existing ERW mill . This necessitates the building of extra areas since the holding of finished tube stock is regarded : as an important selling factor .
THE MARKET
1 . Hol low_Sect ions
NGT has established a reasonable sales base with 1978 sales of square, rectangular and circular hollow sections totalling 6.500 tonnes . There are opportunities for NGT to sell substantially more of these products provided the present size range is expanded downwards as planned . NGT sales are divided between end-users ( structural engineers, plant and machinery manufacturers, lighting column manufacturers, etc .) and stockholders . NGT 's own assessment of market size is 150 - 150/200,000 tonnes p. a ., the major part of which is sold by the BSC tubes division . However, a significant and growing tonnage is consistantly won by importers who are selling " cold-finished " sections into the UK as follows :
1978 ( to November ) 1977 1976
Annual tonnage based on average monthly 42,000 36,000 31,600 imports
NGT can be competitive in price and quality with these imports but they are generally sold to stockholders who wish to buy a complete range of sizes and not just the present highly restricted sizes offered by NGT .
NGT has had good indications that the stockholders who are already supporting it will more readily abandon their imports of hollow sections once NGT can give them a full range . In addition NGT will , if necessary, make special efforts to attract and gain either as direct customers or through preferred stockholders the larger end- users who presently buy imported sections .
2 . BS 1387 Gas_List
The proposed extension into the smaller sizes has been welcomed by the existing customers and will also open to NGT a new range of customers whose purchases are predominantly in the under 60.3 mm sizes or who have been reluctant to buy from NGT until it can offer a fuller range of sizes .
Until NGT entered the market in 1977, BSC was the only UK producer of gast list tube . As has been demonstrated in other areas of BSC 's business, the UK steel purchasers do not want to be entirely in the hands of one supplier and thus have a natural tendency to import if there is no alternative UK supplier . The latest import figures available show that in 1978 imports of gas list tube were running at about 7,500 tonnes p. a ., most of which is believed to be in the smaller size range . NGT is confident it could obtain a considerable share of this imported gas list tube .
SOCIAL CONSIDERATIONS
The additional employment created is forecast as follows - 5 -
Period after 1 year 2 years 3 years commissioning 31 / 12 / 80 31712 /81 31 / 12 / 82
Basis of operation 1 Shift 2 Shifts 3 Shifts
Sales & Administration 2 3 4
Foremen 2 3 4 Operators & General ^ ^ ^ Labour
21 40 60
NGT has enjoyed excellent labour relations with all its employees and the ISTC Union . The proposed expansion is warmly welcomed by them .
In recruiting the required workforce NGT will give priority to workers shed by BSC at Ebbw Vale . A retraining programme is being discussed with BSC and the local training and skill-centre, of the Manpower Service Commission .
VII . FINANCING
The total finance required is : b Capital expenditure 1,290,000 Working capital 474.000
1,764,000
The sources of finance envisaged are :
Equity capital 282,000
Regional development grant 207,000 350^000 Leasing
Cash Flow 280,000 645.000 ECSC loan
1 - 764,000 - 6 -
Caparo Group Ltd ., the parent company of NGT is prepared to subscribe b 282.000 in cash for the issue of new Ordinary Shares at par . The subscription could take place at tbe end of the year to meet pre liminary payments for plant , etc *
VIII . CONCLUSION
The Commission considers that the request complies with Article 56 . 2a ) of the ECSC Treaty and that the proposed investment is economically sound . In consequence, the Commission has approved a loan to Natural Gas Tubes Limited for its project at Tafarnaubach Industrial Estate in Gwent , South Wales for a maximum amount of b 645.000 (+1,029,000 EUA ) or its equivalent amount . Interest is to be reduced by 30,870 EUA per year for the first five years after the payment or payments of the loan .
The Commission invites the Council to give its assent to the foregoing decision .