VERY BIG BUSINESS
Steeling ourselves to learn from Japan
KENNETH WIGGS
The British Steel Corporation proposes to erect two new iron and steel plants, each of which will have a yearly capacity of 10 million ingot tons, by the late 'seventies. One of the new giants would be an extension of an existing Teesside plant where work is nearing completion to give it a capacity of 4 million tons. But the other would be an entirely new works, which, like the Teesside one, would be near the coast, and thus able to take full advantage of the economies of scale, not only of production but of raw material transport by bulk ocean carriers. As the British Steel Corporation is already installing or arranging to install facilities to raise its output from 24 million ingot tons in 1969 to meet a demand of 32.5 million ingot tons in 1975, fulfilment of all its plans means either that it expects to have a total ingot capacity by the late'seventies little short of 50 million tons a year, or that it intends to close down a number of obsolescent inland plants and to encourage the workers and their families to migrate to the coast, just as people moved from Scotland to North- amptonshire in the 'thirties when Stewarts
and Lloyds built their integrated works at Corby. Whichever the intention, it would be revolutionary, not only for the iron and steel industry, but for the whole of the British economy.
The post-war history of our iron and steel industry, like that of the rest of the economy, has been one of stagnation compared with those of the Six, the USSR and particularly Japan. Now, if the British Steel Corporation gets its way, all that is to be changed. This can be seen by comparing the output pro- posals for 1969 to 1980 with achievements in the previous eleven years. Thus, from 1958, when the UK produced 19.9 million ingot tons, to 1969, when production was 26.4 millions, the yearly rate of growth was 2.8 per cent, compared with 5.8 per cent for the Six, 4.9 per cent in the us, 6.5 per cent in the USSR and 19.1 per cent in Japan. Be- tween 1969 and 1975, in which year the British Steel Corporation and the independ- ent undertakings could between them be pro- ducing as much as 35.5 million tons, output would have to grow at a yearly rate of 5 per cent. And between 1975 and 1980, by which time the two new coastal giants should be in full operation, the yearly growth of output could be nearly 6 per cent if inland production were to fall, or nearly 8 per cent if the inland producers made a comeback in the boom conditions which could be ex- pected once the country began to find its way out of its post-war stagnation.
In announcing its proposals for the two 10 million ton plants, the British Steel Cor- poration has stated that, in terms of present- day prices, they would require an investment of £1,700 million—a colossal sum which has already caused a raising of City eyebrows and suggestions that it could only be ob- tained if the Corporation could resort to foreign borrowing. With this country's dis- mal fixed investment record in mind it will hardly be surprising if not a few people ask the Steel Corporation what on 'earth it's up to. It's answer would be—because the world's steel producers are internationally minded, not least those of the ux, who are well aware of what has been taking place during the last twenty years in that other group of offshore islands, thousands of miles away to the east, whose ingot output in 1949 was only 3.1 million metric tons, but which rose almost uninterruptedly to 82.1 millions in 1969, Japan. During the same period, her steel exports soared from an ingot equivalent of 700,000 tons to 24 million tons, while those of the UK crept up from 2.5 millions to around 5 millions. As the originator of the modern ways of producing iron and steel, the British industry must find this extremely galling, particularly when the Japanese Iron and Steel Federation recently tried its hand at forecasting the output of major producers in 1980. It allocated itself 215 million metric tons—considerably more than it forecast for the us, the USSR and the Six—and credited the ux with a mere 36.3 million tons. Huge as the suggested Japanese output is, it repre- sents a drop in the yearly growth rate to 9.1 per cent, from 19.1 per cent in the pre- vious eleven years. The growth expected by the Japanese of the British steel industry is only 2.8 per cent a year—the same as be- tween 1958 and 1969—not very compli- mentary, but understandable enough in view of our record.
Among the reasons for Japan's economic successes are her long coastline, compared with her area; a climate conducive to heavy industrial activity; an intelligent population which appreciates that only by increasing its output can it raise its living standards; and a government which encourages fixed invest- ment and doesn't merely talk piously about it. In 1951, when its economy still had a long way to go to, recover from the effects of the second World War, it founded the Japan Development Bank, whose business it has been ever since to augment the supply of investment capital by granting loans at com- mercial rates for industry to exploit the world's latest techniques. Nowadays the greater part of industrial capital is raised without the help of the Development Bank and the Japanese take pride in their financial orthodoxy and sound currency; nevertheless they succeed in devoting as much as 34 per cent of their gross national product to fixed investment, more, even, . than Western Ger- many, with her 22.7 per cent, while the uic ratio is no better than 18.2 per cent and much too small a portion of it devoted to the modernisation of industry.
Japan's investment in iron and steel has meant the construction of huge integrated plants adjacent to deep harbours which can accommodate the world's biggest ocean-going coal and ore carriers, the latest and biggest blast furnaces with the world's lowest coke consumption per ton of pig iron produced, great oxygen steel converters, automation and a wealth of other improvements—all this in a country which has virtually no iron ore deposits and limited coal reserves with very poor coking qualities.
The UK, with its great coalfields albeit now growing deficient in the best coking grades, its natural gas and its ore deposits, its coast- line, its equable climate and its skilled popu- lation is much better endowed by nature than is Japan for the development of modern industry. In producing its plans for the pre- sent decade, the British Steel Corporation is proposing to exploit these advantages. If, as with some of this country's previous plans, it fails in its objective, other people as well as the Japanese will take advantage of our failure. The French are about to erect a huge coastal works near Marseilles and the Ger- mans have plans to remove some of their capacity from the Ruhr to the Dutch coast. What would we say if some Onassis or other were to erect an integrated ten million ton iron and steel plant on the coast of Ireland?
In denouncing the Government's attempts to cope with wage inflation our trade union leaders have demanded a big investment and industrial modernisation programme. As far as the British Steel Corporation is concerned they are being offered just what they asked for—something invented in Japan. But until the British trade union movement, the British government and the City are as Will- ing to learn from the Japanese as are the British Steel Corporation, nobody in this country is likely to be very much better off than he is now.
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