Last year, 195 countries agreed to neutralise greenhouse gas emissions ‘in the second half of this century’. Anticipating the coming upheavals of centuries of fossil fuel-based development, they stood out the ‘imperatives of a just transition of the workforce and the creation of decent work and quality jobs’. Where does that leave a town anchored in fire and smoke?
By Alex Pashley in Port Talbot
Sandwiched between three brooding hills and a deep harbour, Port Talbot’s steelworks sprawl south of the town.
Blast furnaces and billowing smokestacks sit languidly on the horizon as a chill wind wafts the smell of sulphur across the docks. It is said this vast complex inspired the post-apocalyptic city of Ridley Scott’s Blade Runner, its spectacular flare seen from the elevated M4 motorway.
The natural gas is now saved for the coke ovens, but the bleakness prevails this Friday afternoon. Job losses announced in January hang over the town.
As workers clock off from twelve-hour shifts at the plant owned by Indian conglomerate Tata Steel, the centre is deserted. Pubs were packed when the UK’s largest steelworks employed 18,000 at its peak in the 1950s. But after spasms of lay-offs, the headcount has fallen to 4,000.
A global collapse in prices driven by a glut of cheap Chinese steel has undercut producers throughout Europe. The highest electricity bills of regional economies are deepening the pain. Unions and local lawmakers fear the extinction of the industry without state intervention.
The first nation to industrialise could be the first to lose its steel-making capacity.
In the Lord Caradoc pub along the high street dominated by bookmakers and charity shops, a 53-year-old plant engineer sits among retired steel men sporting Welsh rugby jerseys. Wales is playing an international fixture against France. It’s a space for unvarnished opinions.
“Right now I can’t see what we can do to turn this around. China are killing us,” says the worker. He speaks on condition of anonymity, concerned for his job as half his department of 50 face redundancy. “On top of all of that, we’re making all the steel at quality we can and we lose a million pound a day.”
Port Talbot’s fortunes are hinged on the health of the steelworks. Since the first works were founded in 1902, the community of 37,000 on the South Welsh coast has waxed and waned with its sales of hot rolled strip steel.
It’s a source of well-paid jobs – workers start on £27,000 a year – in a region dogged by above-average unemployment. A supply chain supporting an estimated 10,000 staff has developed in the area. That was valued at £3.2bn of output and £1.6bn of value added in Wales in 2010, according to Calvin Jones at the University of Cardiff.
Locally, it underpins four jobs per steelworker. In the Aberafan shopping centre, their wives are prized clients at Strands hair salon. Charlotte Lewis employs eight stylists whose blow dries fetch £13.50 at the newly-refurbished business. “We want to keep all the girls on,” she says, but “we know there will be a big knock-on effect.”
British steel in numbers (source: UK govt)
UK produced 12 million tonnes in 2014, compared to China’s 823Mt
It accounted for 0.1% of GDP and 1.3% of manufacturing output
Port Talbot produces 4 million tonnes of steel a year, a third of UK steel
The industry employs 34,500 people in 535 businesses – down from 271,000 in 1971
Alan Coombs and David Bowyer are fighting that battle. The union leaders meet me in the office of Welsh Assembly Member David Rees in a grey business park. Leaflets on public services and copies of the Port Talbot Magnet free newspaper rest on tables.
It is a fraught time. Tata Steel Europe’s chief executive has suddenly resigned, his interim replacement without a seat on the board in Mumbai. “It makes me nervous,” says Coombs, head of Port Talbot Multi Unions, clutching a cup of tea. Consultants McKinsey & Company are devising a survival plan with the company. The Welsh government has launched a task force to shore up the supply chain.
Bowyer, a 40-year veteran of the plant and member of union Unite, is dejected. The works have fared like a “sine wave” responding to ebbs and flows in demand over the decades, but this time is different. He says dumping by China and increasingly Russia on the domestic market is pushing it to the brink.
“It’s no different when the government supported banks when they were collapsing,” Bowyer says. “They took a share in the running. We’re not asking for a share. We’re just asking them to stand up and fight for us to have a level playing field.”
It’s been a torrid six months for British steel. Last October, Tata announced 1,200 roles were to be axed in Scunthorpe and Lanarkshire. The same month SSI in Redcar closed, cutting 2,200 jobs.
An economic slowdown in China, which produces half of world’s annual 1.6bn tonne production, has led to oversupply. Imports into the UK have jumped from 2% to 8% over the past three years, while the price of slab has halved in the last year.
Ministers have been criticised for sitting on their hands, while pursuing trade deals with the Chinese. EU state aid rules to prevent governments’ propping up ailing industries limit the response. For now short-term survival is the goal. But in future decades, Britain’s carbon-intensive industries look precarious.
Steel, cement and petrochemical works all produce greenhouse gases that stoke climate change. Port Talbot’s heavy industry consumes electricity – mainly generated by burning fossil fuels – on a scale of Swansea, a city with six times the population.
The UK has a target to slash emissions at least 80% by mid-century compared with 1990 levels (it’s 35% there). But steel is the backbone of the modern economy, building the bridges, planes and wind turbines of tomorrow.
Last year, 195 countries agreed to neutralise GHGs in the second half of this century in a UN-led pact. Acknowledging the ructions of centuries of carbon-based development, they noted the “imperatives of a just transition of the workforce and the creation of decent work and quality jobs”.
Where does that leave a town anchored in fire and smoke?
The European Union’s emissions trading scheme was meant to make polluters pay for their climate impact. So far, the effect has been muted. Generous free allowances, coupled with the 2008 financial crisis hitting demand, have pushed the carbon price down to €5 a tonne.
In the UK, the Treasury imposes a surcharge, boosting the price to £22/t (€28/t). But that is only for the permits companies need to buy.
Tata’s UK steel operations received some 31 million surplus allowances over 2008-2011, worth an estimated £389m, according to think tank Sandbag.
The European Commission forecasts prices rising to €25 in a decade, as it reforms the system.
Industry lobby World Steel warns pay-to-pollute rules in Europe but not elsewhere will kill home industry and simply displace emissions. Climate campaigners label those “scare stories”, calling for more radical changes to spur necessary investment in low carbon alternatives.
The industry is getting cleaner, union leaders protest. Port Talbot recycles gas to fire the coke ovens and uses slag from the blast furnace for cement. But it remains a fundamentally energy-hungry process.
“It’s no sugar factory,” one worker in the Lord Caradoc pub says, a note of exasperation in his voice. “It’s a steel plant which makes molten iron, molten steel.”
Crossing the bridge
Across the corridor from David Rees’ constituency office is the town’s representative in Westminster, the UK parliament. Born 40 miles away in the valley town of Tredegar, Stephen Kinnock MP was plunged straight into the steel crisis on winning the Aberavon seat ten months ago.
Sat with his back to historic Labour election posters, he recognises steel’s collision course with climate obligations.
“I want to live in a world where there are zero carbon emissions. I would like to live in a world where we have a totally green industry and green economy but we are not there yet, and we have to cross the bridge to get there,” he says. “In the meantime people who work in these industries have to be able to put bread on the table.”
It is why he supports Treasury relief on heavy industry’s electricity bills – with the cost spread among households instead.
EEF, the manufacturers union says that without intervention, climate policies will increase electricity bills in UK to £37 per megawatt hour by 2020, making up one-third of the cost.
In April, the government is to announce whether it will further compensate the energy intensive industry.
Britain is no stranger to deindustrialisation. Over consecutive decades, foreign competition has shuttered factories and mines as the economy rushed towards services. The proportion of workers in manufacturing and mining has fallen from 26% to 8% since records began in 1978, according to the Office for National Statistics.
Wales was famous for its coal mining, pulling tonnes of the black rocks from coalfields across South Wales and sending them to export terminals of Barry and Cardiff.
But there is no clear industrial strategy, let alone one in tune with decarbonisation, according to Ray Hudson, a geographer at Durham University who has researched the regeneration of coal communities.
The scrapping of a £1bn competition for carbon capture and storage in this year’s budget was evidence of short-termism. Such technologies could prolong the country’s industrial base, storing belched carbon underground. Instead, Hudson says, “what we tend to do is go to the end of the cliff and fall off.”
One project dealing in the politics of the long term lies a few miles north-west along the Fabian Way. Trading the birthplace of seasoned actors Anthony Hopkins and Richard Burton, I travel to Swansea, the stomping ground of famous poet, Dylan Thomas.
Here a company wants to harvest the power of the tide, which is the highest in Europe. Swansea Bay Tidal Lagoon would be the first of its kind and says it would extract power from the sea for 120 years, its operator Tidal Lagoon Power says.
TLP plan a U-shaped sea wall measuring 9.5km, containing 16 turbines and generating enough power for 155,000 homes. The £1bn venture would be the “pathfinder” for six more lagoons along the Welsh coast and into England which could eventually provide 8% of the UK’s electricity needs, says spokeswoman Lisa Jenkins.
It would be a shot in the arm for the area. But last month it met a setback with the Department of Energy and Climate Change launching a six-month review into its cost and viability.
The Gloucester-based company is haggling for a guaranteed price for its power over the next 90 years of £96.50/MWh. By comparison, the Hinkley Point C new nuclear plant – widely criticised as too expensive – is in line to get £92.50/MWh for 35 years.
“People really want this project to go ahead, but most importantly they really need it to go ahead,” says Jenkins, born in Oxford but with a thickening Welsh accent. The project says it would pick up Tata’s at-risk supply chain, and aims to source the bulk of its materials from British businesses.
Looking out to the proposed site as a brisk Atlantic wind whips the crests of waves, Alan Glass remarks on its potential.
It’s the second-highest in the world after Canada’s Fundy Bay, the chair of its independent supporters’ group says and resident of nearby Gower. “It always seemed to me that wind and sun are fickle, and we live a long way up north,” he adds, “with the tide it’s totally predictable.”
The city has a newfound swagger. Town hall planners have regenerated the dockside and Swansea University campus has built a beachfront campus on a former BP site. TLP hopes the lagoon with a visitors centre and promenade will pull in 100,000 more daytrippers a year. The low tide would reveal an iconic Welsh Dragon.
The project receives broad support from local politicians, but back in Port Talbot it’s limited in assuaging jobs fears.
Alan Coombs, the union leader, “sees possibilities in the future” for laid off workers, but it won’t come soon enough. The anonymous engineer is more curt. “It’s not going to make up the numbers, is it? Tidal Lagoon sure as hell isn’t going to employ 4,500 [from the steelworks].”
Redundancy packages from Tata and the Welsh government will help with retraining. An Amazon depot is based out of the town, and carmaker Aston Martin is building a new plant in St Athan, creating 750 jobs. Wales has a nascent solar and onshore wind sector. But nothing like the monolithic mass-employer steelworks.
“You joined as a lad and you had a job for life. Now the youth are facing facing flexible hours, dodgy contracts, if they manage to scrape a job at all,” says a retired truck driver at the plant.
Examples do exist of transitions of workforce.
Sophie Bennett, policy officer at industry group Renewable UK, cites oil and gas workers transferring into the UK’s leading offshore wind industry. Roughnecks helicoptered out to rigs can quickly learn to scale 75-metre tall turbines off the coast of Scotland. The Scottish government has set up a £12m fund to get workers into education.
But clear signals from government that the renewables industry is here for the long haul is key. “They need to know there is a future for the industry beyond 2020, and in terms of skills, business needs to know what the anticipated skill supply is across the country,” Bennett says.
That this transition is planned is vital, says Hudson, the university professor. Germany’s nurturing of green technology firms in its coal and steel heartland, the Ruhr valley is one model for industrial restructuring.
“What sort of economic structure do you envisage being sustainable 20, 30 or 50 years, and how do you get from where we are to where that is?” he asks. “Do you believe you simply leave it to outcomes of private sector decisions in what is effectively a global and increasingly lightly-regulated market, or do you say we need pro-actively interventionist policy?”
How the UK affords protection to energy-intensive industries as it undergoes a low-carbon transition has no easy answer, says Mike Bradshaw, professor of global energy at Warwick Business School.
“This is a global problem, and it needs a global solution. There’s no point in the EU making a martyr of its industrial base.”
But short of a worldwide carbon price, these dislocations are to continue.
Tony Taylor, an ex-blast furnace worker with 44 years’ service at the plant ushers me into a borough council building as staff are leaving for the day. Now fully focused on his councillor duties after retiring last year, he is nostalgic for the steelworks as its future darkens.
“Port Talbot was a good place to live. The nickname at the time was Treasure Island because you went in and struck gold.”
But those days are gone. The next set of job cuts will have a “corrosive” effect on this tight-knit community. He worries that the dark humour and camaraderie that the coal and steel industries bred will be lost.
Exposed to the hard edges of world trade, Taylor says he can’t blame China in building industry to develop, but cannot accept British leaders’ inaction.
“I think this town given an even chance and a fair wind can thrive.”