Coping with steel demand proves a Speciality

Mark Broxholme, managing director of Speciality Steels in South Yorkshire, said the future of the business is “bright” after it took a hit during the last recession.

In the last year, Tata Steel has invested £20.3m in the Speciality Steels business, including two new furnaces, replacement equipment and investment in reducing energy consumption. Speciality Steels, which has a turnover of £700m and now employs 2,300 people after a recruitment drive last year, has the capacity to make just over one million tonnes of steel per year. It is currently running to 75 per cent capacity, but Mr Broxholme said the aim over the next three or four years is to get up to 90 per cent capacity, based on additional sales.

The firm’s strategy is to have a third of its sales going into Europe, a third into Asia and a third into America within five years. Currently, 10 per cent goes into Asia, with 60 per cent going into Europe, he said.

For aerospace, for example, the firm’s steel is used for components such as engine shafts, rings and casing, and landing gear. As airliners look for ways to mitigate the rising cost of oil, many are choosing to replace the engines for more energy efficient types, creating opportunities for Speciality Steels.

Mr Broxholme said: “Our intention is to grow our position in this market [aerospace]. Basically people in Asia Pacific, China and India, are all earning more money and want to travel now. There’s massive growth, particularly in that part of the world.”

Meanwhile, oil rigs are having to go deeper and into more extreme parts of the world, requiring more steel, Mr Broxholme said, adding: “The demand for power in China and India is insatiable.” He said global automotive growth around the world is also “phenomenal”, especially in Asia.

Speciality Steels has six sites, including its Stocksbridge and Rotherham bases. The business, which uses electricity to melt the steel via electric arc furnaces, has a distribution site in China and has spoken to the Chinese government about setting up a second one. Rather than using iron ore, the business uses recycled metal.

Although the economic situation is uncertain at the moment, Mr Broxholme said the business is “better placed” than it was when the last recession hit.

The business underwent a significant restructuring programme after the banking crisis struck in 2008. It entered into a period of heavy losses, said Mr Broxholme. There were 1,700 job losses, including through redundancy and retirement, from a workforce of 3,500. Mr Broxholme said: “The recession took us down to less than 20 per cent of activity and that was a huge financial problem.”

Meanwhile, all fixed costs, such as maintenance and hire, were halved to £100m in 2009. The message that June was to “break even by Christmas or close”, Mr Broxholme said. By winter of that year the company had achieved that goal.

Mr Broxholme said the decision was taken to “move out of anything commodity that anyone can do” and concentrate on speciality steel. Speciality Steels is now “profitable”, said Mr Broxholme, but he declined to provide exact figures.

He spoke of the importance of supply chains and particularly the supply chain around advanced materials in Yorkshire, adding: “It’s incredibly important that local and national politicians understand the value of having robust supply chains in the UK. Companies involved in supply chains create opportunities for each other and can attract other complementary businesses, which can mean new investment and jobs. However, if companies in supply chains fail, it can threaten all the other parts of those supply chains and it’s incredibly difficult to build them back up again.

“That can’t be good for the UK in the long run, especially if we, as a country, want to rebuild our manufacturing sector.”

Meanwhile, in the face of rising energy prices. the company has recently announced new energy saving schemes. In Rotherham, a £2m investment in new equipment for the steelmaking area’s fume extraction system aims to reduce electricity usage by more than 9,000 MWh every year.

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