KEVIN RAMNARINE
Regarding the ArcelorMittal situation, the question that must be asked is, what is the broad national interest? By that I don’t mean what is the interest of the workers of ArcelorMittal or the trade union or the management or the owners of the company. I mean what is in the broad national interest or the interest of the wider population. We should recognise that whatever happens from this point on will impact on every single citizen of this country.
What has been missing so far in all public discussions on the matter are the roles and positions of the State Enterprises involved namely NGC, NEC and T&TEC. ArcelorMittal has made it clear that their grievances are around natural gas prices (NGC), port rates (NEC) and electricity rates (T&TEC). The Government has said “let’s talk.” It’s therefore obvious what they will be talking about. If there is agreement then it will be that NGC, NEC and T&TEC have made concessions. Are we prepared to make these concessions and how would they affect those three companies? Note that one of the three (NGC) is a major contributor to the Treasury by way of corporation tax and dividends.
The presence of a steel industry here has always been premised on the availability of cheap natural gas and a large amount of electricity. Incidentally, said electricity is generated from the burning of natural gas. So there is double dipping in the natural gas bucket in the steel production process. Other industries also use electricity but not in the quantities required by the steel industry’s arc furnaces.
As a country seeking its broadest national interest we must therefore ask what is in the best interest of the companies we own namely NGC and T&TEC. It seems that in the current discussion no one is prepared to bell the cat. One may further posit that in an environment where there is a shortage of natural gas (supply < demand) that the NGC should be selling gas to where it gets its highest return.
That aside, there are two issues of great concern. The first is the precedent that is being established. It is a source of concern that a private company can force a Government to the negotiating table in this way. What if every company at Point Lisas that is unhappy with natural gas prices, electricity rates and port rates takes the same approach?
The second source of concern is the suggestion that the State should acquire or nationalise this 35-year-old facility. That makes no economic sense. If ArcelorMittal couldn’t make money with the plant, do we expect that it would make money as a State enterprise? The net result of such an approach would be another inefficient State enterprise that is subsidised by the pockets of tax payers.
That is the last thing we need, especially at this time. The Government acquiring the plant is the worst option.
The facts are that the external environment is not kind to the steel industry and it may be that way for a while. Steel prices have collapsed on the back of China’s dramatic increase in steel production in the last decade.
China now accounts for half of the world’s steel production making it by far the world’s largest producer of steel. With China’s economic growth rate cooling down to 6.9 per cent that country produces more steel than it needs. The result is that China, once the great guzzler of the world’s steel, is now allegedly dumping steel on the international market. The natural consequence is that prices have fallen by more than half in the last four years. As a result all over the world steel plants are closing down. Late last year in the UK, Tata Steel announced the closure of two facilities and the consequent loss of 1,200 jobs. In Ohio, once a centre of the US steel industry now part of the “Rustbelt,” two plants are set to close down at the end of this month. We are neither immune from this nor are we alone. Sometimes in business you have to decide to stop doing certain things and concentrate on those things that bring the greatest value. This does not only apply to companies it also applies to countries. Sometimes we have to decide when to exit a business and when to stay the course. We are now at that juncture as far as steel is concerned.
We must tread very carefully in any discussion with ArcelorMittal. It might also be a good time to have a look at the natural gas master plan. It would also be useful for the Government to hear from the commercial teams at NGC, NEC and T&TEC. This way all the pros and cons of the situation can be balanced. In any negotiations the Government and its agencies NGC, NEC and T&TEC must consider the broad national interest and not be distracted by sectoral interests or corporate tactics.
