Irish Steel Holdings Limited (Amendment) Bill, 1982: Second Stage.

Tuesday, 29 June 1982

Dáil Eireann Debate
Vol. 337 No. 1

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Minister for Industry and Energy (Mr. Reynolds): Information on Albert Reynolds  Zoom on Albert Reynolds  I move: “That the Bill be now read a Second Time.”

The main purposes of the Bill are to increase the authorised share capital of Irish Steel Limited from £25 million to £50 million; to provide, as a consequence, a similar increase in the value of shares which the Minister for Finance may take up; and to provide for an increase in the limit on the ministerial guarantee of borrowings by the company from £60 million to £75 million.

The Dáil will be aware already that Irish Steel Limited are a wholly State-owned company with fully paid up shares amounting to £25 million held by the Minister for Finance. The total amount of borrowings covered by ministerial guarantee at present is approximately £6 million. The principal activity of the company is the manufacture of steel from scrap. Their principal products are reinforcing bars, merchant bars and sections in a range of sizes mainly for the construction industry.

The Minister of State at the Department of Finance dealt with the general background leading to the company's present difficulties when a supplementary Estimate of £25 million was passed by the Dáil on 13 May last to enable the company to repay their short-term borrowings. I consider it appropriate, nevertheless, for the benefit of the Deputies present today to again outline at somelength the general background to the company's difficulties and to provide more detail in relation to the present state of Irish Steel.

Up to 1978 Irish Steel's production capacity was about 150,000 tonnes per annum but by that stage the free trade conditions resulting from accession to the EEC and the obsolescent plant had led to serious losses. It had become abundantly clear that the company's entire [154] operation required restructuring if they were to stand any chance of becoming viable within the European Community. The company therefore, with the help of a Canadian engineering firm, had a restructuring plan drawn up and work on implementing this plan began in 1978.

The old plant was replaced by a modern electric arc furnace capable of melting a load of 114 tonnes of scrap in between two and three hours to make 90 tonnes of molten steel. This is poured into a new casting machine which produces three continuous steel beams. These are rolled on a unique rolling mill to produce bars which can be round, angular or flanged in cross-section and can be up to 70 metres long.

The project is now essentially complete and its final cost is estimated to be £80 million. Of this, £64 million is the cost of fixed assets and preproduction expenses and £16 million is the additional working capital requirement of the project projected over the period June 1978 to June 1986. The £64 million fixed asset costs and preproduction expenses of the project represents an increase of more than 100 per cent over the first estimate for the project when it was initially approved by the Government in February, 1977. The reasons for the increase are several. Firstly, the original estimate was based on a general design concept and not on detailed costings. Cost increases since then are attributable to the following principal factors: the need to extend and modify the original design, which was the principal cause in the increased cost; delays in deliveries and delays due to the restricted factory site itself; increases in preproduction expenses due to increased interest charge resulting from delays, and to higher interest rates than anticipated; and exchange losses due to the break with sterling.

It gives me no pleasure to announce these cost increases but the reality of the situation is that these cost increases have already occurred and our concern now is to overcome their consequences. The cost of the development itself is only one of the costs incurred by irish Steel. They also incurred losses from 1974 to 1980 due to the obsolescence of the old plant: [155] they had it suspend production for 18 months while major items of plant were installed; and losses have been incurred since July 1981 running-in the new plant and attempting to break into international markets. These factors together had resulted in borrowings totalling £85 million in May 1982. These borrowings are reduced to £60 million when account is taken of the Supplementary Estimate for £25 million, which was passed by the Dáil on 13 May 1982.

The company's accumulated losses at 30 June 1981 amounted to almost £26.3 million and their anticipated losses for the year to 30 June 1982 are about £22.8 million. Further losses are expected to be incurred in each of the years up to 30 June 1986. The company have recently negotiated a loan facility for £5 million and are now in the process of attempting to arrange further borrowings amounting to £10 million to enable them to continue in operation to the end of the year. Their ability to raise this amount will be heavily dependent on the enactment of legislation to provide for an increase in the ministerial guarantee limit. It is clear that the level of borrowing is far too high for the company to bear and corrective measures are obviously necessary.

The current situation in the world steel market is very poor. The oil crisis of 1974 severely depressed the steel market and it has not yet recovered. At present the level of overcapacity in steel production in Europe is estimated at 30 million tonnes. In addition to this the European steel industry is experiencing increasing competition from such countries as Japan, Korea and Brazil in the case of the market for heavy steel, as the steel plants in these countries are of a more modern design and efficiency. In the market for the lighter range of products, where Irish Steel operate, there is also stiff competition from third world countries with their cheap labour and cheap energy in many cases.

To prevent the European steel industry from being destroyed by internal competition a scheme was drawn up in the late seventies, called the “Davignon Plan”, with the overall purposes of cutting [156] down production capacity and restoring international competitiveness.

Measures currently being exercised by the EEC Commission in this connection include: Restrictions on investment in steel; restrictions on State aids to steel; restrictions on steel production; measures to raise steel prices; aids for redundancy, short-time working and early retirement; loans to industries which can help to replace employment lost through steel plant closures and loans to help steel undertakings to carry restructuring plans, involving reduction in capacity.

As far as the Irish steel industry is concerned, which represents only about 0.2 per cent of Community production, our principal concern in the context the ECSC discussions on the continuation of such measures for the foreseeable future has been ensure that Irish Steel, who carried out their recent restructuring plan with EEC Commission approval, should now be viable.

In the Dáil debate on the Supplementary Estimate for Irish Steel, accusations of spreading pessimism and of creating a lack of confidence were made. I should like to reiterate that it is in the interest of the taxpayer that all the factors relating to Irish Steel's difficult position should be fully spelled out. To put things into their proper perspective, it must be pointed out that it is in the context of the uniquely difficult world market situation to which I have referred that Irish Steel must quickly acquire the ability to export over 70 per cent of their products to other European countries. The difficulties facing Irish Steel are enormous and it would be misleading for me to understate them here today. The prospects for the international steel market simply cannot be viewed optimistically.

As Deputies will be aware, some 11,000 tonnes of reinforcing bars from Argentina were imported into Ireland earlier this year. Normally, the total Irish rebar market is about 65,000 tonnes per annum, of which Argentina has traditionally no part. The fact that some 17 per cent of the market has now been supplied by a new entrant will cut back the market share of the suppliers who normally service the Irish steel market and will [157] have a particularly serious effect on Irish Steel. I had an immediate complaint made to the EEC Commission regarding these imports and I understand that Irish Steel Ltd. lodged an anti-dumping complaint with the Commission on 28 May 1982. It is my intention to support this anti-dumping complaint in any way possible.

As far as employment is concerned, Deputies may be aware that, earlier this year, the company negotiated a voluntary redundancy scheme for employees who were surplus to requirements. Under this scheme 64 employees have accepted redundancy. I understand that, due to the current very depressed market conditions and the substantial accumulation of finished and semi-finished products, the company propose to introduce a three-day working week for some 500 employees in the near future.

Notwithstanding these difficulties it is relevant to point out that Irish Steel now have one of the most modern plants of its kind in the world. It has the advantage of being able to produce a far wider range of products, 84 in all, than any other mill of its size in Europe. This gives the company a competitive advantage in dealing with merchants. In addition, it is fair to say that a small, efficient and flexible producer has a special advantage in the market, however depressed it may be. The plant being used by Irish Steel is the only type of steel plant which is now profitable in Europe. Taking these factors into account, Irish Steel's prospects, though difficult, are reasonably good given a proper approach to sales management and cost control.

In relation to marketing, I should again like to point out that a new sales manager, who had considerable experience selling in international markets, has been appointed. A total of 20 new management personnel have been recruited since 1978, including the new chief executive and the new sales manager, in the company's efforts to build up a management team of the highest calibre in order to make it more competitive in the market place.

Irish Steel's current position, in the absence of a proper capital structure, is [158] such that they will be forced to have continued recourse to borrowings. A crucial stage has been reached in the affairs of Irish Steel and it is normal good administrative practice for the Government to consider very carefully over the next year, all the options for the future of Irish Steel, to ensure that the best interests of both the company and the taxpayer are safeguarded. In this connection, I should say that the Government and the European Commission will jointly appoint consultants in the near future to assess the viability of the company. Until this examination is completed it would not be possible for me to say what the Government's future intentions would be for the future financing of the company.

I should like to stress that no new financial aid, and this includes equity investment, may be made by a member state to a steel undertaking without the prior approval of the Commission. As far as the provisions in the present Bill are concerned, the Commission has approved the increase of £15 million in the ministerial guarantee limit. The Commission has not, however, approved the taking up of additional shares in the company and will not consider an application for further investment in the company until the results of the consultancy study are available. In the meantime, the increase in the ministerial guarantee limit will be sufficient to ensure the continued operation of the company for some months.

Irish Steel are under no misapprehension of the difficulties facing them. I am hopeful, however, that with the continued good response from the company, and with a properly worked our strategy, the future of the company may be safeguarded.

The only other provision in the Bill is a minor amendment to provide that the company should comply with directives about remuneration and conditions issued from time to time by the Minister for Industry and Energy, given with the consent of the Minister for the Public Service.

I am confident that the Bill will commend itself to the Dáil and I recommend the Bill for its approval.

[159]Mr. Boland: Information on John Boland  Zoom on John Boland  It is no exaggeration to say that the past number of years have not been happy times for Irish Steel Holdings. It is equally true to say that the past eight years especially have not been happy for the steel industry in Europe and internationally.

In relation to the company, the subject matter of the Bill before us, they have gone through the trauma of modernisation and change from an obsolescent plant to one that is now among the most modern of its type in Europe and throughout the world. In 1974 the company, together with their competitors, had to endure the trauma of the revolution in oil prices and the effect that had on steel production and steel markets throughout the world. With other manufacturers in Europe the company have experienced the increasing aggression and competitiveness of steel manufactured by Third World countries who have the benefit of cheap labour and who have been making inroads into the European and other markets.

It was for such reasons that the decision was made in early 1977 to initiate this programme of modernisation for Irish Steel Holdings. It was interesting to read the statement in the speech of the Minister today that the final costs of restructuring the plant and providing adequate working capital have resulted in a figure which is more than 100 per cent in excess of the original estimate presented to the Government at that time. It is fair to say that it is difficult to keep down costs in times of high inflation in many countries — an inflation that apparently has been allowed to become endemic in our economy — but nonetheless it is disturbing that estimates of such a substantial nature could be so out of line as not to have sufficiently estimated the potential factor of continuing inflation and of other costs which might influence the eventual out-turn of the cost of a plant of this nature.

In relation to very many of the heavy investments — not just Irish Steel — which the State have undertaken and are being asked to undertake, sufficient attention has not been paid to the production [160] of realistic estimates of high capital costings, of restructuring and of State investment in both State companies and participation in the equity of private companies. The history of the estimates provided to Governments in this regard is a sorry one and, to some extent, reflects upon us all. Public representatives and public servants must examine their collective consciences as to whether sufficient attention has been given to how realistic estimates of this nature are at their time of presentation, and how that presentation influences the decision of Governments as to the extent of their participation and commitment to any particular venture.

The losses in Irish Steel have been steadily mounting each year since 1974, initially because of the effects of the oil revolution and the increasing obsolescence of the type of plant which has been operated. In more recent years it was due to the disruption in production and sales because of the installation of the new plant, the gearing up of that plant and the attempts which are now being made to break into new markets. All these factors have resulted in a total borrowing by Irish Steel of some £84 million or £85 million. That is indeed a daunting figure when one looks at the existing share capital of the company and the Government's participation in it.

It is interesting to look at the loss figures produced by Irish Steel for each of the last three years for which accounts have been published. The losses to June 1979 amounted to £2.926 million. A year later they were £6.614 million and, in the last year for which figures are available, the losses amounted to £12.946 million. While I think the House would accept that there were exceptional reasons for the losses in the year up to June 1981 because of the finalisation of the commissioning and installation of the new plant, they are nonetheless daunting figures. In many respects one of the few heartening things that one could take from the production of the annual report and the chairman's statement for Irish Steel, is that the report itself was published very efficiently and expeditiously [161] in the context of the financial year in question, a trait that is not common among a number of the companies that enjoy heavy investment by the taxpayer.

I was a little taken aback that the Minister, while explaining that the old plant had a production capacity of 150,000 tonnes per annum up to 1978, did not outline what would be the minimum amount that would be required to be produced by the new plant in order to make it viable. There are two separate figures to be given: the total production capacity of the new plant operating at peak and the other, the more realistic one, is the figure which would be required to be produced in order to reach any level of viability on the new mini mill, which is of the modern electric furnace type. There seems to be a divergence of opinion between the Minister of State at the Department of Finance, the Minister for Industry and Energy and the chairman as to the range of products that can be produced in the new plant. The Minister and his colleague have stated that the plant is capable of producing 84 products when it is operating at full range. The chairman in his statement claimed that the plant can produce a range of over 100 products. It is a small point but the Minister responsible and the chairman ought to be ad idem as to what can be produced.

As the Minister has said, the total capital cost of the plant and preproduction expenses now amount to £64 million. There is a requirement of an additional £16 million for extra working capital. I was glad to see those figures presented today by the Minister separately. There was to some extent an attempt in the moving of the Supplementary Estimate to combine the figures. The point was fairly made at that time by Deputy Eddie Collins that the addition of working capital ought not to be included in the initial capital cost of setting up and gearing up plants.

In relation to the last year for which we have figures there was, as the chairman said, a particularly strange situation where the firm had minimum production, maximum costs and negligible sales. The sales involved existing stock and the company [162] made no finished deals during the last financial year. The upshot was that in October 1980, 213 employees were laid off. It was hoped this would be of a temporary nature and in July last year 112 workers were re-employed. Subsequently a scheme has been introduced to persuade people into early retirement.

We should have discussed at greater length the situation regarding the total workforce in the firm at present. The Minister referred to the fact that it may be necessary for Irish Steel to put the total workforce on a three-day week. I am not clear whether the 500 workers he refers to are the total workforce of the firm or the core of that force. From the point of view of the substantial numbers employed by Irish Steel it should be made clear what the future earning potential of that workforce is. It has been suggested that at present, even with the limited amount of production in Irish Steel, production quantities exceed the amount of sales and to some degree stockpiling is taking place. If that is the case when we are in the initial period of production and the prospect for the workforce is a three-day week, it is a very serious matter and should be discussed by this House in greater detail than has been outlined by the Minister.

The Minister announced that there is to be a study of the future viability of the firm and, while there was an indication given of that previously, he has today indicated that that study will be set up not just by our Government but by the European Steel and Coal Commission also.

I realise from the Minister's remarks that there is to be further clarification in regard to the amount of authorised borrowing that the EEC Commission may permit. This is an enabling Bill to allow borrowing to be made by the company on the State, with the proviso that this must be agreed to by the European Commission. I would like some indication to be given to the House of how long it is expected that that study will take. We have a year ago, in a Supplementary Estimate a few months ago, and today, seen further and fairly massive injections of State funds into Irish Steel. It is important [163] from the point of view of all concerned, the taxpayer, this House which has a responsibility to that taxpayer, but which has equally a responsibility to the employees of Irish Steel Holdings Ltd., that there be some indication given of the Government's intention and commitment towards the future of Irish Steel Holdings Ltd., not just for the remainder of this year — as would appear to have been indicated by the Minister now — but during what obviously will be the considerably difficult period of endeavouring to break into new markets with these new products and to regain Irish Steel Holdings traditional share of the Irish market. I fear there will be perhaps less than full enthusiasm displayed, or that might be expected to be displayed, from the sales and marketing personnel, apart from any other employees, if they find themselves in a situation in which there is a very large question mark hanging over the Government's future attitude to Irish Steel Holdings. Whilst a study may be deemed inevitable by the EEC there is nonetheless an urgency attaching to this from the point of view of the employees of the company, their whole approach to the operations of Irish Steel Holdings and their confidence in the knowledge of what is Government policy in relation to their company.

It is now generally accepted that the sort of mini-mill provided in Cork is the most modern of its kind in Europe, indeed is one of the only type of steel mill likely to make a profit in the foreseeable future. It is heartening that at least in relation to the type of plant, and more especially the type of product capable of manufacture in Cork, there is great potential if and when there is an upturn in world markets and return to a more realistic pricing structure. However, the worry will have to be in regard to the extremely high capital costs incurred in the installation of this plant, accumulated losses over that period of installation and the servicing of the debt that has developed during that period.

The strategy outlined by Irish Steel Holdings is that over 70 per cent of the products they will manufacture will be [164] exported. That laudable aim must also be described as a brave aim in the context of an already much overcrowded and depressed world market. It is sobering to reflect that at present over-capacity amongst European steel mills amounts to 30 million tonnes per annum. Apart from that over-capacity within the Community there has been also the much more aggressive marketing policy adopted by Japanese, Korean, Brazilian and other manufacturers. That strategy on the part of Irish Steel Holdings must involve a most aggressive marketing policy combined with a stringent cost control in relation to production costs. Those two factors alone will not suffice. Unless there continues to be in an increasing way an adequate EEC pricing policy and also an adequate EEC policy in relation to production control and the policing of quotas then in the medium term there is no real hope of a return to a viable European steel industry. Whilst one must welcome the changes introduced in the management and marketing policies of Irish Steel Holdings and in their very real commitment, as illustrated in their annual report, to adopt not only an aggressive marketing policy but also one of having stringent production cost control, those alone — good housekeeping in relation to the Irish producer — will not suffice as long as there is a depressed European and world market with artificially low prices and with the extraordinary over-production capacity existing amongst the major steel mills throughout Europe.

Therefore, it behoves the Government, not alone in regard to any study they may commission as to the viability of Irish Steel Holdings but also in relation to their approach and representations to the EEC Commission, to ensure that the best interests of Irish Steel Holdings and their future marketing policies are pursued aggressively, and also that their interests in relation to ensuring production quotas are extended. I understand it had been hoped that steel production quotas would be extended until the end of 1983 but that as a result of a decision taken at the beginning of May production quotas will be extended for a further 12 months only until the middle of next year. [165] We are already talking about a situation in which apparently it will take Irish Steel Holdings four to five years to bring their full range of products into production progressively and to market them. We are also talking about a situation in which the introduction of production controls in Europe has helped but marginally only within the market at present. Unless there can be a decision taken over a realistically and reasonably long period to insist on those quotas for production amongst the major steel manufacturers of Europe, together with a progressive upgrading of pricing policy, the prospect for Irish Steel Holdings of being able to branch out into the other range of products available to them will be seriously diminished.

For that reason it is very important that the attitude of Irish Steel Holdings be supported by the Irish Government and the Minister responsible in their dealings with the European Economic Commission. In that regard, a number of factors arise. Whilst Irish Steel Holdings Ltd. were out of production — presumably because of the depressed state of the market — there was quite an active campaign engaged in by those who will now be competitors of Irish Steel Holdings in an effort to gain that section of the market traditionally enjoyed by Irish Steel Holdings. Such things as specially extended credit terms were extended to customers of Irish Steel Holdings on the Irish market with the result that one of the first tasks now facing the company is to recover for themselves their traditional share of the Irish market. In that regard the importation of 11,000 tonnes of Argentinian reinforcing bars referred to by the Minister is of considerable worry. While the Minister has referred to this matter now and said that he has supported the complaint lodged by Irish Steel Holdings Ltd., it is incumbent on him to explain to the House exactly how this Argentinian steel — steel coming from outside the Community — could find its way onto and be dumped on the Irish market in such a manner that the only action that could be taken by an Irish Minister was to complain retrospectively that it had arrived and was on sale.

[166] When we are talking about a world situation of over-production and of manufacturers outside the Community surely there could have been devised a safeguard whereby it would have been impossible for that non-EEC steel to have found its way onto the Irish market. It is a little too late to talk about a State company in the difficult position in which Irish Steel Holdings now find themselves, facing heavy competition from their competitors, to discover also steel produced from outside the Community arriving on the Irish market at about the same time as the only Irish steel mill owned by the State is endeavouring to recover their share of that market. Whilst the Minister's support of Irish Steel Holdings complaint is to be welcomed I should prefer to hear from him the steps he intends taking to ensure that there cannot be a repetition of such an occurrence.

I accept that Governments generally are anxious to see their own steel industry supported. Perhaps the Minister is not the only one who has experienced problems with Argentinian steel merchants of one sort or another in recent times. The Minister should have told us how he intends to tackle this or similar problems in the future. He should also have referred to the controls he has taken or would take to prohibit the exportation of Irish scrap to countries outside the EEC. The situation generally about licences in relation to the importation of scrap from non-EEC countries should be attended to. We should be told if the Minister has power to prohibit the exportation of scrap to non-EEC countries.

The new plant at Cork is well placed to benefit from any increase in world or EEC markets. Our production represents only .2 per cent of the total steel production capacity of the EEC. The EEC capacity represents only 18 per cent of the total world capacity as opposed to 29 per cent manufactured in eastern Europe, 16 per cent in the USA and 25 per cent in Asia. The production capacity of Irish Steel in world context is, therefore, miniscule. In relation to the production quotas I referred to which the Commission introduced, have temporarily extended and, we hope, will extend [167] further, it is as well to make the point that while Irish Steel are manufacturing at the moment far less than their total capacity, because the new plant is only going into commission, it would be wrong for the Government to agree to a quota being assigned to Irish Steel based on the production capacity of the old plant because that capacity is far less than the capacity of the new mill. That is why I inquired about the viable level of the new plant. In any negotiations in regard to Irish quotas it is necessary that those quotas are based on the viable level of the new plant rather than on the traditional output of the old plant which ceased operation in 1978-79.

I accept that in the last year, through the activities of the Commission, there has been an increase of 12 to 14 per cent in the price of steel in Europe although during 1980 the EEC prices were 15 to 20 per cent lower than the price in the USA. It should also be said, in relation to pricing and production quota controls, that it would clearly favour the type of product and the range of product manufactured by Irish Steel if the quotas in relation to dealers, which apparently at present are set in relation to dealers who handle over 12,000 tonnes per annum, were lowered and applied to dealers handling smaller amounts of steel. I understand that it would be in the interests of Irish Steel Holdings Limited if the regulations applied to dealers handling steel in excess of 3,000 tonnes per annum rather than the existing quotas of 12,000 tonnes because of the type of product Irish Steel are capable of producing. The Minister should investigate the possibility of having those quotas in relation to dealers extended to the smaller type dealers as well.

The chairman's report refers to the fact that the 1981 energy costs for Irish Steel were the highest energy costs incurred by any steel mill in Europe. The Minister should explain to what extent Irish Steel are at present using natural gas produced in Cork and to what extent the plant might be capable of using further supplies of that natural gas. I accept that before we endeavour to solve the energy costs [168] problem in relation to Irish Steel, we should establish a national pricing policy for energy sources. Perhaps, in regard to assessing the capabilities of large State companies like Irish Steel to use the natural energy sources produced here, we should as well assess the pricing policy in relation to the sale of that gas or other native energy sources to such production companies. We should receive clarification of the extent to which Irish Steel could rely on natural gas for their total production from the point of view of energy needs.

It is sobering to reflect on the fact that a company operating in such a competitive and depressed market should have to say that they have found themselves with higher energy costs than any of their competitors in Europe. This factor will have to be taken into account and will have to reflect itself in the pricing structure of Irish Steel products. I would like the Minister to tell us when the mill will be capable of being in full production. There was a suggestion in the chairman's statement that the mill would not reach its optimum output until the end of the fourth year after start up. In view of the serious situation obtaining in relation to sales and the possible stockpiling, which I hope the Minister will deal with in his reply, and the employment prospects of the existing employees, we should be given an indication if it is intended to progressively carry through the implementation of the introduction of the greater range of products in each of the years over the four-year period to bring Irish Steel to a situation where the company will be producing the full range of their products within four years. If that is not now the intention we should be told the range of products it is expected will be produced by Irish Steel in each of the next few years.

I understand there has been IDA involvement in the financing of the new plant. We should be told if the IDA involvement in financial terms has been included as part of the assessment of the State's financial contribution towards the modernisation costs of Irish Steel or if the IDA involvement is being treated [169] separately and has not been shown in the figures we have been given.

Deputy Collins raised two questions on the Supplementary Estimate which might be dealt with by the Minister when he is replying to the Second Stage. The social aspects of steel restructuring are being financed by direct contributions within the EEC. Deputy Collins said that any such financing should be funded from the social fund rather than by direct contributions from the member states. He also raised a point in relation to Article 56 of the European Coal and Steel Treaty about subsidised loans for industries which re-employ steel workers. He made the point that if those loans were to be used extensively in other countries to attract employees away from non-viable steel mills employing large numbers, such loans at very attractive rates could operate to the detriment of the IDA's general policy of attracting industry to this country. As a progression on that, I would ask whether any investigation has been carried out or any thought been given to the use of such loans by this country if it is found necessary for more employees of Irish Steel Holdings to be placed on short-time working. Has there been any investigation of the possibility of the utilisation of loans of this nature to attract or stimulate other industries in the Cork area towards re-employing these highly skilled workers by using the subsidised loans available from Europe?

The annual report of Irish Steel for the year ended 30 June 1981 sums up the position in regard to that company better than the Minister or I could do. On page 9 of this report it is stated:

We have already obtained sufficient evidence from our experience during commissioning to forecast with confidence that the plant will produce goods competitively if it is operated within the constraints of the planned costs attached to a plant of this nature. If costs, whether remuneration or interest charges or overheads, are allowed to get out of hand to the extent that the economies of this very modern plant are distorted, our customers, traditional and new, will have no choice [170] but to turn to alternative sources of supply.

The company is obliged to operate within Government policy as to pay in the public sector, an obligation which is in the national interest as well as that of the company.

The company is delicately balanced, very heavily burdened with debt, seeking substantial equity investment from the State at a time of severe economic constraints. We are seeking new markets and attempting to recover those which we had to opt out of substantially while our new plant was being prepared for, installed and commissioned. The present market situation is one of unprecedented difficulty with capacity far exceeding demand. The result is intense competitiveness in the market place.

We cannot sell what is too dear to a potential customer. We cannot stockpile in the hope of rising prices because the cost of working capital would be prohibitive. We look with confidence to all who work in the company to recognise the difficult and special circumstances surrounding the emergence of this virtually new company and realistically to abate their personal expectations from the company until it is established and once again in sight of profits.

That is not exactly the most optimistic of reports but it is a very realistic assessment on the part of the chairman of this company, which has undergone the trauma of such a major modernisation programme and loss of their existing markets, as well as conversion of their marketing policy and the production of a range of products in new areas. These are the daunting tasks facing Irish Steel. They are the same sort of problems which face a number of other State companies engaged in the competition of European and world markets. This company are, however, facing a situation of enormous over-production together with a very depressed market which makes trading for profit an extremely difficult task in Europe, whatever about parts of the Third World.

[171] The potential exists within the new plant in Cork and the expertise exists within the work force to produce competitively and contain production costs. The desire exists there to market aggressively and endeavour to re-establish their position on the Irish market, as well as breaking into new export markets. I do not believe that any of those things will lead to a guaranteed future for Irish Steel without the support of the Government and the European Commission, both in relation to pricing policy for steel in Europe and the control of steel production, with the progressive closing down of obsolescent and older mills throughout Europe. There must be strong support by the Government towards the continuation of the control of production quotas and the restructuring of pricing policy by the Commission. These matters must be aggressively pursued by the Government, as must policy in relation to licensing of the importation of steel from non-EEC countries, the prohibition of scrap exportation from this country to non-EEC countries and a definite and firm enunciation of policy by the Minister as to the role the Government see for Irish Steel in the future and an indication of the period during which the Government accept that it will not be possible for Irish Steel to show trading profits. What targets have the Government set for the company and in what year do they expect that Irish Steel might be in a position to reach a break-even point or begin to make a return on the heavy level of State investment?

We are at the crossroads for this company and we need a series of correct decisions by the management of the company and by the Government in regard to our economy, as well as supportive and corrective action by the EEC to ensure that Irish Steel can fight through and attain the share of the market which will enable the mill to operate viably and enable their employees to look with confidence to a continued career. All those things are possible with the combined good will and expertise of all involved. There must be a definite decision by the Government as to what is required from [172] Irish Steel Holdings and as to the supportive action they will take with the European Commission to ensure that market conditions make it possible for the company to operate viably and increase their range of products.

I welcome the introduction of the Bill and ask the Minister when replying to deal with the points I have made and to give not only to the House but to Irish Steel an indication of the time scale of the investigation which he has announced.

Mr. J. Bermingham: Information on Joseph Bermingham  Zoom on Joseph Bermingham  This is a Bill principally to increase the authorised share capital of Irish Steel from £25 million to £50 million. The Minister explained that agreement must be reached with the European Steel and Coal Community before this can be done.

Before discussing the Bill we must look at the background to Irish Steel. In May 1978 the Government approved new plant there at a cost of £30.8 million. We are told today that the plant cost £80 million, but that includes some running costs or necessary capital. I am completely confused. The Minister must have reasons and excuses — but probably more excuses than reasons — for this increase. When the last amendment was made to the legislation in 1979 the then Minister made some interesting remarks. I can, if the House so wishes, quote him directly but he intimated to the House that this company would be viable over a three-year period. Perhaps the installation of the new plant was not completed in time. Has the Minister now any idea when this company has a reasonable prospect of being viable? We must give the company the opportunity of being at full production before we can pronounce on its viability. In the very near future consultants will be called in from Europe and from the Irish Government——

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  They are in.

Mr. J. Bermingham: Information on Joseph Bermingham  Zoom on Joseph Bermingham  Fair enough, they are in. How long is the examination of the company to take? Will it be undertaken before capacity production is possible in the new plant? If so, will the results of that examination be the big [173] stick to be used to close down this company? We complained on the debate on the Estimates for this company that the Minister of State was taking a pessimistic view; but the view being taken today is even more pessimistic. I would be frightened if I were one of the workers in the steel industry. The whole thinking appears to be woolly. The most modern plant of its kind in Europe has been installed and before it starts production the consultants are in examining the question of its viability. There is something defeatist in this procedure, which needs an explanation from somebody. This plant, which has cost from £60 million to £80 million, is necessary if steel is to be produced here. Production had to be held up for a time during installation of this expensive plant. I am an ordinary layman, not au fait with the intricacies of the EEC and am completely at a loss in this matter. Would the Minister be specific in his replies? Perhaps I am being foolish or ignorant, but there appears to be something really wrong.

The chairman of Irish Steel in a review estimated the cost at £60 million and the Minister now says it is £80 million. I would not be satisfied if I had an estimate of £30 million which over a period of three years became £60 million. There are factors bringing up the cost, interest rates and many other items, but Irish Steel had been making a modest profit from the early seventies with the old plant. Losses have been recorded since 1975 which have escalated over the last three years. The losses in 1976 amounted to just over £2 million, in 1977 they were a little less and in 1978 they fell to £1 million; but up to the mid-1981 they amounted to £12 million. Perhaps the explanation was that the plant was not in full operation and that there were costs nonetheless. Whatever the explanation, this wholly State-owned company, with a capital share of £6 million in 1979, has been continuously losing money. We have now, it is agreed, the most modern plant in Europe capable of economic production of a range of from 80 to 100 products. Will we have a quota imposed from Europe which will never allow the company to develop to the full capacity? [174] If that is the case, it is about time we started to bargain and said that that would not do us. It will not do us. Every effort will be made to restrict the production of steel in the European Community. If we are not allowed to develop the company to its full capacity, we can hardly expect it to be viable. We know how the quota system has worked previously. Side by side with that unfavourable position we are going to import from third countries. The Minister has mentioned that a good proportion of our steel last year came from Argentina and the European Community seems unable to protect us from that importation. The sooner we get out of that type of conglomeration the better. As far as our industry is concerned, it is not doing it much good and the sooner we talk turkey to those people the better.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  Hear, hear.

Mr. J. Bermingham: Information on Joseph Bermingham  Zoom on Joseph Bermingham  On the one hand, we will be restricted from using the company's capacity to the full and in the most economical way, and on the other hand, a price will be imposed on us by the Community. If this is the way the thing is to be operated I am sorry for Irish Steel, because in these circumstances they will have no chance of survival. The European steel people have agreed reluctantly that this industry should be developed. Surely that agreement was that the industry would be allowed to develop at full production capacity? It is agreed — the company have paid tribute to them — that there are highly skilled workers there. That being so, our aim must be to have the mills working at full economic capacity, but it seems to me that the Minister is pessimistic about it. When the Estimate was being presented we complained that the Minister of State at that time was being over-pessimistic, but I think the Minister today was even more pessimistic.

I do not want to delay this necessary Bill, which I welcome. Neither do I want to see lame ducks being allowed to survive; but if this industry is not allowed to survive it will have a devastating effect not only throughout the country but on [175] the workers and their families. I do not think we are sufficiently firm with our European partners in matters of this kind. We always seem to be the good boys who all the time play to the rules while our partners are inclined to overlook the rules.

This company complained about dumping of steel here by third countries, but by the time there is a European decision on that I am afraid the steel will be rusting in any buildings it has been used in, because there seems to be no end to the length of time it takes the EEC to operate. Even before discussions begin the harm is done and by the time a decision is arrived at the whole atmosphere has changed. By the time we have a decision on the company's complaint the whole problem of dumping will have become irrelevant. It is up to the Minister, in the Council of Ministers and at Commission level, to determine this matter quickly. If the third countries like Argentina and others are competing unfairly with us, if steel is being dumped here either directly by third countries or through the EEC, then a decision must be reached on this urgently if we are to save our own industry. When will this dumping be investigated and when will we begin to talk about procedures to prevent it? Dumping has been occurring, but let us not waste time talking about that now: let us get on to discuss the most efficient ways to prevent it happening again this year or next year. If it is found that action cannot be taken to prevent it let us be told that that is so.

Will this mill be allowed to produce at full capacity? We know that if that were to be the case it would be viable. The Minister must spell this out to us. We have been told that consultants are inquiring into the position, and my understanding is that we cannot do anything until these consultants have finished their inquiries. If the results of the inquiry are not favourable, does it mean we will not be able to do anything further for this industry, that we will have to let it die a natural death? If that is so we will have killed a valuable industry without giving it a chance, without giving it an [176] opportunity to prove itself. We have been told that efforts are afoot to fix a reasonable price for the product over a number of years. If a reasonable price is allowed and if the mill is allowed to work at full capacity — and this is an ideal set by the EEC — surely the undertaking must be viable? If we hinder that prematurely before the mill is in full production we will have wasted the money we spent building it, we will have invested the money but not given it a chance to work. If we start on the road with this we must see it to its final conclusion. I am worried that the Government are not determined enough in many of these areas. They must insist, irrespective of what the European consultants say, on the industry being permitted to produce to its full capacity over a period of years so as to be able to assess whether it is fully viable or not. If there is any danger, due to restrictions on producton or limitations in investment, that we are not going to allow it reach that stage we should stop now. There is no point in proceeding any further unless we give the company an opportunity of working to their full capacity. After that we will be in a position to assess whether they are viable and capable of competing in the European markets.

Mr. B. Allen: Information on Bernard Allen  Zoom on Bernard Allen  On behalf of the 700 people employed at Irish Steel I should like to put a number of questions to the Minister. Those people deserve straight answers because they have endured three to four years of inconvenience, some of them on short-time work, while the plant was being modernised. When the Supplementary Estimate was discussed in May management and work force in Irish Steel were praised for enduring the inconvenience. The chairman of Irish Steel Holdings, in the course of his annual report, praised the work force for the co-operation given to management during those difficult three years. The chairman also praised the excellent labour relations that exist in the company. In my view a question mark about the future of Irish Steel Holdings was introduced that day and what I said then has been borne out by subsequent events.

[177] The work force in Irish Steel have been faced with the possibility of the introduction of a three-day week and all sides accept that that is inevitable.

In June I asked the Minister for Trade, Commerce and Tourism if he would take steps to eliminate the dumping of cut price steel on the Irish market and if he would investigate reports that imported Argentinian steel was being used by local authorities. The Minister said he was aware that some 11,000 tonnes of Argentinian steel were imported into Ireland in the first quarter of 1982. He said he understood that an anti-dumping complaint was lodged by Irish Steel on 28 May 1982 with the Commission, the responsible body for taking action in relation to dumping. The Minister said it was his intention to support this complaint.

What the Minister for Trade, Commerce and Tourism said then and what has been stated in the House today are different. The Minister for Industry and Energy should explain the change that has taken place since then. Today the Minister told us that Deputies would be aware that 11,000 tonnes of reinforcing bars from Argentina were imported into Ireland earlier this year. He said he had an immediate complaint made to the EEC Commision regarding these imports and he understood that Irish Steel lodged an anti-dumping complaint with the Commission on 28 May. The impression created on 15 June was that the Minister was supporting the complaint by Irish Steel but the impression being created today is that the Minister took immediate action when the problem was brought to his attention earlier this year. The workers would like to know what took place. They expected immediate action to be taken by the Minister when the question of imports was brought to his attention but the impression created here was that the Minister was supporting the stand by the company on the issue. The Minister for Trade, Commerce and Tourism earlier this month also said, with regard to Argentinian steel already in Ireland, that he had been informed that some inquiries about its use in public [178] authority contracts were made but the indications in those cases were that the steel being used was not Argentinian. I should like to know if the steel being used was Irish. Will the Minister for Industry and Energy confirm that all steel being used in local authority contracts is of Irish origin? That is worrying the work force of Irish Steel.

The next question I should like to put to the Minister relates to quotas. Deputy Eddie Collins in May raised the question of quotas. The Minister, in the course of a reply to him, said that in the case of Irish Steel the method of quotas was unsuitable as Irish Steel's historical production was very small and they now needed a higher than average capacity utilisation rate. The Minister said he had been taking steps to have the company treated as a special case and made the point at a Council of Ministers meeting on 4 May that any quota system after 30 June 1982 should not make it difficult for a company, whose restructuring was approved by the Commission, to be viable. He said he understood that the Commission would propose more flexible systems for the period after June 1982.

That statement of the Minister's worries me because in a European Commission publication a news item stated that the ten Industry Ministers who met in Brussels at the beginning of May agreed to extend the Community's system of steel production quotas for a further 12 months, until the middle of next year. That item stated that the quotas which the European Commision had hoped to have extended until the end of next year were introduced last year in an effort to curb over-production and to stabilise prices. The Minister on 25 May said he would be hopeful of a more flexible system at the end of June this year and it appears that a decision had already been made to extend the present system until the end of next year. It worries those in Irish Steel that the Minister is not consistent or familiar with what is happening in relation to quotas. The Minister should explain those inconsistencies in his reply.

Deputy Hegarty has confirmed that consultants entered Irish Steel this week to begin their study. That was news to me [179] because I was under the impression they would be going in during the first two weeks in July. In the course of the detailed reply to Deputy Eddie Collins the Minister said, in relation to future aid to the steel industry within the EEC, that the long-term prospects of the company would have to be discussed with the Commission and the decision governing aids required that all aids envisaged should be notified by 30 September 1982. As he had not fully worked out the future needs of the company he could not say whether problems would arise with the Commission. A team of consultants are going into Irish Steel this month. They will have to report to the Minister, the Government will have to consider the report and submit a case to the Commission and there are fears that it will be a quick decision and another rushed job. I appeal to the Minister to give this his undivided attention over the next three months.

Irish Steel is one of the prime concerns of the Cork region, a region which has experienced higher than average unemployment over the last few years. We are losing our nerve as a nation in the present severe economic situation. There is a tendency to eliminate what we consider to be lame ducks. There is an inference that Irish Steel is a lame duck and should be eliminated. The pressures being experienced in the economy at present should not be used as an excuse for cutting out companies which are in temporary difficulty. It is far more expensive to create new jobs.

The company have now commissioned their plant. They will not be in full production for another four years. I agree with Deputy Bermingham when he said that now was not the time to make decisions in relation to the future of Irish Steel. We should ride out the economic storm we are experiencing and wait until the company get back on their feet. I am sure the company realised that they would lose part of their market. They are attempting to re-establish their place in the steel market and should be given a life-line and time to do this.

I ask the Minister to give an assurance to workers who will be on a three-day [180] week from next week that this will not last for very long. He is the Minister responsible and people expect him to give them an indication as to their future. Their living standards will be further cut. I hope it will not be mentioned that workers will be better off being on a three-day week because they will also get social welfare. Most workers want to work a full week for an honest wage. It might be acceptable to them financially to work a three-day week for six or nine months, but in other areas it would not be acceptable. I ask the Minister to give an assurance that three-day week working will not last for a long time but will be curtailed before the end of this year.

Mr. Markey: Information on Bernard Markey  Zoom on Bernard Markey  It is obvious that decisions will have to be made by Irish Steel and the Government in this matter. The real decisions will rest with the Minister because they will have to be taken in a political and social context. The chairman and management of Irish Steel, when making their decisions, will have to operate within certain constraints. Through no negligence or inefficiency on their part they have had to suffer and will do so for a considerable time. The world situation as regards steel has been going from bad to worse. In America, the great home of free enterprise in steel, there have been complaints that the off-loading by European steel producers is taking up to a 20 per cent cut of the American steel market. For the first time since 1938 American steel production is at its lowest level.

As regards the situation in Europe, the picture has been one of strikes in Britain and riots outside the steel mills in Belgium and France. Where there is a total dependancy on the steel industry for jobs there is an increasing wage burden and indebtedness. The situation in America is that there are now losses where profits were once the scene. Something in the region of £1 billion has been lost by the steel industry in Europe in the last two years.

The real decision the Minister and the Government must face up to is: where does Irish Steel stand in this context? What did we expect of it when it was [181] taken over by the State? We could not have judged it even then by the ordinary business criteria of profit motive or added-value motive. The real motive behind the takeover of Irish Steel by the State lay in the social and strategic fields. It is time the Government inquired into how strategic it is to have our own steel production unit. We are involved in the manufacture of light steel. Will this reliance on light steel meet our construction needs if the crunch comes as regards difficulty in meeting total steel requirements in the future? We have thrown a lot of money into Irish Steel and will have to give more in the years ahead. What do we expect out of it? Do we expect jobs or a unit cost of production which is at least as competitive as most other European countries?

If it is on the job security front we must recognise that having regard to the amount of money that has been put into Irish Steel down through the years the jobs there are probably some of the most expensive in Irish industry. I appreciate that the Minister is being frank with us today, though perhaps not as frank as he would like to be. He would be a fool if he were to say that there is the utmost Government confidence in the future of Irish Steel. We must have regard to what the world situation is. However, the Minister would be making a far better case for Irish Steel if he were to spell out how strategic the industry is from the point of view of the national purpose and if he were to tell us how production figures are likely to be in the next couple of years.

When talk emanated first about investment in the new furnaces and so on we were presented with a target figure of the order of 250,000 tonnes by 1984. How close are we to that figure or will we ever have the opportunity of nearing it having regard to what is happening in the other European countries? In other words, how well are Irish Steel serving Irish industry? For a steel industry to be viable we must have a very healthy construction industry but I see no evidence that would lead one to conclude that this is the situation. If we are to export to the level that has been mentioned — and there has been produced in this regard a figure of [182] up to 70 per cent of production — we must have healthy prices for our exports. Again, this question is tied in with the question of what our production costs will be. We have diversified by widening the range of products of Irish Steel but I wonder whether this might not be an inhibiting factor in terms of keeping down our production costs. It is possible to spread our production load widely and to continue to have very high overhead costs. I would prefer to think that there were certain bread and butter lines in the steel industry as in any other on which we could concentrate for a greater dividend for ourselves.

Obviously, the provision of jobs in Irish Steel has been a costly business and, naturally, the public representatives both in the constituecy concerned and in the neighbouring constituencies wish those jobs to be preserved, but in addition to the Minister's speech there have been signs emanating from the Government in recent weeks about having a fresh look at the whole picture, about identifying the lame ducks of industry and so on. This Bill will enable the Minister to seek further loans to help Irish Steel but he will not be in a position to take up any more shareholdings in the company without having the consent of the European Commission. Perhaps it is good that we have a big brother in that form overseeing us at this time in the progress of semi-State bodies such as Irish Steel so as to ensure that we put money only in those areas in which there is some evidence of viability. Otherwise, we could be putting ourselves on a very slippery slope, as has been the case in respect of many other State bodies down through the years. The European Commission in the terms of reference in which were set up the Davignon Committee have no reservations about the future of the European steel business. Contained in the terms of reference was the suggestion that provision be made for Davignon to consider aids for redundancy, short-time working and early retirement as well as for loans to industries which could help to replace employment loss suffered because of Steel plant closures. This is all an indication of the arena into which we are [183] putting ourselves and that is why I say that the real decisions lie not with the management of Irish Steel but with the Government. These are political as well as social decisions and are not related totally to economics.

We must decide what we want to do with Irish Steel. We must decide on how strategic it is to have our own steel production. Reference has been made to imports, overnight as it were, from Argentina. There is nothing to stop us importing steel from other Third World countries. But if it is strategic for us to have our own steel production, the Minister should begin to spell out just how strategic that is. I am of the opinion that we should have our own steel production unit. Indeed, we would be a very backward and primitive country if at this time we did not have some form of steel production, but whether that production should be in the private sphere or in the public sector is a question that we must consider.

It has been mentioned that before their absorption by the State, Irish Steel showed a profit, not every year but in one out of four years. That was a commendable performance by any enterprise engaged in such business. The timescale being given to Irish Steel by way of this enabling measure is not at all generous but it is inhibited by the consultancy study being carried out by the European Commission and by the Irish Government. In the next three to four months, or between now and the time when that study is concluded, the Minister must decide where we are to take up increased shareholdings in Irish Steel in the years to come. There has been a considerable jump in the amounts sought in enabling legislation in recent years, particularly in 1979. That is why it is as well now for the Government to decide how strategic and how important steel production is to us. We must decide whether we would be better off importing all our requirements from other countries, be they within Europe or outside it.

The management of Irish Steel will have to make decisions also but their decisions will be in the context of being [184] as efficient as possible in the field of using the most freely available and the most cheaply available forms of energy. Their decisions, too, will be in the field of industrial relations. Perhaps when replying the Minister would indicate how succesful or otherwise has been the performance in Irish Steel in terms of industrial relations.

One would hope that the workers in Irish Steel, workers who are privileged and fortunate in having such a concern in their midst, appreciate the high level of State funding that goes into maintaining their jobs. At the end of the day, Irish Steel depend on a healthy home construction industry. If we can meet the needs of our construction industry in so far as steel products are concerned we will be going far along the way to justifying the high level of investment in the company.

I welcome this legislation because I consider it important that we have a steel production unit for the years ahead. It is heartening to find the Minister being frank enough with us today to spell out the situation and I hope he will be as willing to make the major decisions that will have to be made as a result of the consultancy report to which I have referred. Even in America high wages have been the most outstanding feature of the whole steel industry in recent years. If high producation costs coupled with high wages become part of the scene with Irish Steel Holdings, we will have considerable difficulties in the years to come. Perhaps now is the time to face up to making real decisions. I hope the Minister will do so.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  It is with pleasure that I rise to support this increased authorisation of share capital. I welcome this Bill. It is, to my mind, a statesmanlike approach to an industry that down the years has contributed much to our industry and agriculture and which was founded when working in a steel mill was a tough job, second only to mining, where people worked under terrible conditions and built up a viable industry with Irish labour. Added to that they had the disadvantages, which since have been overcome, of being on the island. The steel industry now has become a status [185] symbol in the harbour area. The families of the original workers are working in Irish Steel Holdings and are proud of what is happening. We do not have to patronise them here in this House. They are doing an honest day's work for an honest day's pay, and it is not because I am from the constituency that I say that. I invite Deputy Markey to come down and see for himself that we have good men there. They are not privileged in any way. They work hard still under extreme heat but they are proud of what they are doing and they have reason to be proud of their product, which is good by any standards. I have used some of it myself for roofing, farm sheds and all sorts of construction work. That aspect has not been mentioned this evening.

We are not engaged in the initial stages of the industry but we are producing a considerable amount of corrugated and sheet iron for agricultural purposes. The labour relations in Irish Steel Holdings now are excellent. We had one or two incidents and some problems, during a Coalition period as it happened, but they were overcome and generally speaking that industry is running smoothly and well. The fact that it has financial problems has little or nothing to do with the work force. As it is now a small, modern, efficient mill, there is no reason why we should not be able to compete once the market opens up. One of the biggest problems in Irish Steel Holdings — this is where I disagree with the previous speaker — is that we are in a world-wide, European-wide recession, but most of all we have our own recession which is worse than the European recession. We have our own financial problems here and very high inflation. Many of the big customers of Irish Steel are themselves in financial difficulties. There is very little point in selling a large quantity of steel to a big operator if he is not going to pay you or if you are not sure that his cheques are OK. Some of our big customers have problems. The Minister's problem is more one for the Government at this stage, whatever Government are in power, to sort out the difficulties of our economy and our inflation. We were talking here the other day about agriculture [186] and the problem is still the same. If we get things rolling, if we get this country moving as it should move, there will be plenty of markets for Irish steel here at home for quite a quantity of their products in the building industry and in agriculture. The Minister knows as well as I do that construction in agriculture has almost ceased, and the agricultural sector were substantial customers.

With regard to diversification, I do not think we should have too much of it. We have sufficient diversification to be viable. We have not spread out into sheet steel for ship-building or anything like that. We are producing the sort of thing that normally sells well and will sell well again. With the confidence that we can inspire we will ride out this storm. I will not stand for shutting down, paring off at a time like this. By all means we must batten down during a period of storm. At times we must do things like that, but I do not believe that we should jettison any of our valuable cargo. That is where I differ from many people in this House. I believe that we can ride out this storm and when we do so we will need Irish Steel Holdings. Of course we will, because, as everybody in this House must realise, if the day comes when there is a market on the European mainland for steel the Third World will not be coming here with it. We will have to go out, cap in hand, and bid for it and pay through the nose for it, and what are we to do with all the waste iron, steel and so on that at present is being processed in Cork harbour? It is a natural thing to have a steel industry and the only reason ours is not doing well is the recession.

On the question of electricity for the steel mill, the Government should avail forthwith of the surplus black oil that will be produced at Whitegate to get our electric turbines going down there. I believe that the piping is there for conveying black oil from the refinery to the ESB power station, and if that is so it will be energy at a very right price because no shipping would be involved. This is a source of electricity that we have, as it were, going for waste and it would help with regard to our economy. As was [187] pointed out, our full capacity is something around 280,000 tonnes and that sort of tonnage would not cause a problem if we hold tough now, if we ride out this recession and, as our Labour spokesman said, if we stop imports.

I would like a clear answer as to how this 10,000 or 11,000 tonnes of steel got in here, from the Argentine or anywhere else, without us knowing about it. I am of the opinion that we are and have for far too long been the good boys of the EEC. We are the people who keep all the rules and allow things to happen. We heard this morning in Dublin Castle from some of our colleagues in the Council of Europe, and I think they would have much more respect for us if we began to act tough in ensuring that no bar of iron that we can produce here is allowed in from anywhere else, I do not care a damn where it comes from. That should be our prime duty as a Government. We should not leave it to a few workers here and there who probably will not know about it until they see it on an articulated lorry, or they might not see it at all. Remember they are living down at the extreme tip of the country. It could be coming in through various ports around the place and we would never hear about it. A firm decision of the House should be that once we start rolling, no more imports will be allowed in.

I am pleased with this money for Irish Steel Holdings. This is money put to good use. It will not be a recurring decimal as some people seem to think. It will not be throwing good money after bad. Once this major injection of capital is made and once we get out of our troubles we will make a profit again. If we are going to adopt the attitude that as soon as there is any trouble in Irish Steel or the Sugar Company or NET or whatever company it happens to be we should rationalise, we are wrong because all rationalisation means is closing down. In relation to NET, we had the consultants again and rationalisation came up, and in NET we are faced with a high risk industry and the possibility even of cutting down the numbers of security people. That sort of rationalisation is like a farmer who when [188] times are tough closes the gate of the field, forgets about it and presumes he will do a better job with a smaller operation, instead of selling the field and making a profit. That is not good business. There is only one way out of our present economic difficulties and that is to fight our way out. In this Estimate the Minister has given Irish Steel an opportunity to batten down and to hold on. I know many of the people in it personally and I can guarantee that when the time comes they will not let us down.

Minister for Industry and Energy (Mr. Reynolds): Information on Albert Reynolds  Zoom on Albert Reynolds  Let me take this opportunity of thanking the Deputies who contributed to this debate. It is interesting to contrast the attitudes of various Deputies as to how the situation of Irish Steel should be approached. There was a very realistic and pragmatic approach by all concerned. That is the way the problems of Irish Steel have to be approached. I know I have been accused of being pessimistic by some Deputies. But I set out to be realistic and pragmatic in relation to the situation as I found it in regard to Irish Steel. There is no question but that the mini-mill which came on-stream and started production only in the middle of last year is one of the finest in this category anywhere in the world. Only last week on my visit to the States I talked to directors of large companies involved in the steel business and they would have been delighted to have nothing to operate in such a depressed steel market but a mini-mill. But that is not the case.

There are serious problems that originated when this programme was put together. The estimated costs at the time have doubled and we have to work out how we are going to attack and live with those additional costs. Coupled with that we are now going through the worst depression ever seen in the steel market in Europe and throughout the world. To ask me to take a look into a crystal ball and make a commitment here this evening as to when the problems of Irish Steel might be resolved would be to ask the impossible. It would be unrealistic to attempt to project it. I cannot say when [189] the problems of the steel markets of the world are going to be solved.

My duty is to bring the facts before the House to allow Deputies the opportunity to express their views on them. When I came into office I looked at the various semi-State organisations under my control and at the question of monitoring the expenditure of the various semi-State bodies. This has to be done in the best interests of spending public money so that we do not find out too late down the line that costly mistakes are being made. We all know that costly mistakes have been made and if we had found out about them earlier corrective action could have been taken and some of the problems alleviated. But for far too long we have been finding out too late what the real extent of the economic problems in various projects have been — too late to do very much about them.

In regard to Irish Steel, the Government are faced with the situation where the estimated cost of additional State equity to make Irish Steel carry through until such time as they might become viable, which is estimated as being about 1986 or 1987, would be about £75 million. That is a lot of money. Some people in this House talk about getting the economy right and getting the finances right and not losing our nerve in difficult situations and riding out the storm. But it takes money to do all those things. We are the custodians of the taxpayers' money. We have to be satisfied that we are spending it in the right direction so that we can get a return. For anybody to suggest that one can ignore an estimated figure of £75 million because it will not have any bearing on our financial affairs is ridiculous because it will certainly have a major impact.

It is against that background that we must look at this very seriously. We just cannot write in a figure of £75 million. It does not grow on the trees. It comes from two sources. It can be borrowed or the public can be taxed with it. We have to be realistic when we look at where we are going to get this sort of money that is being demanded by various State agencies to keep them going. In 1979 when a package was being put together for Irish [190] Steel everybody felt that that was sufficient and would see them through. It was not sufficient and that is why we are in the situation we are in today. I have to be satisfied that the figures now being put out are realistic and that it is the final figure. If so, let us quantify it and make sure that it is. I know the difficulties of the market are a problem for every steel mill and I am not pointing the finger at the work force in Irish Steel when I say that there are problems that they cannot overcome. That is the position. But we have to find out exactly what the position is for our own sake in the first instance and, second, because no State aid can be delivered to Irish Steel without the approval of the European Commission.

Whether we like it or not that is the position. Deputy Bermingham suggested that he did not like Big Brother at all and suggested one way of dealing with him. Deputy Markey suggested a different way of dealing with him and said that maybe it is as well that he is there and that we have to at least satisfy him that what we are doing is the right thing. But the fact remains that we have to produce before the European Commission the full extent of the package of State equity for Irish Steel before approval will be given and we must do this by 30 September of this year. I spoke to the commissioner concerned in relation to this when the question of sending in consultants on behalf of the EEC and ourselves arose. I said it was imperative that we get in there and get the information as soon as possible and have all the facts on the table before decisions are taken and that I also had to bear in mind the question of 30 September. I do not see a problem in that respect. The consultants have gone in and the study will be done expeditiously and all the facts will be on the table.

It is worth knowing at this point that the projections presented to me on 23 April and prepared by Irish Steel did not foresee any viability before 1986 or 1987. But already those projections are out of line because the projected sales for this year of over 100,000 tonnes will now reach only about 41,000 tonnes. That means we have to have a totally new look [191] at the projections for the next four or five years because the basis for this year's figures are certainly not going to bear themselves out. On that basis it is right and proper that a full study should be done. We should get all the facts on the table. That is what we are doing. The consultants will be reporting back to the Government and the EEC at the earliest possible moment and then the decisions will be made in relation to where we go from here.

I was asked what was Government policy and I have spelled out where we are going. This is the first step to enable the operation to be a holding operation for the remainder of this year, and we expect the measures to be implemented by the passing of this Bill will fit the needs of Irish Steel for this year.

I dealt with the projections laid before me on 23 April and commented that they are out of date. Because of the drop in sales this year the whole question of projections has to be recast. That is what the consultants will be doing. Most people do not like working a three-day week; they would prefer to work a five-day week, but when one judges the actions that had to be taken in the steel industry not alone in Europe but in the United States one sees how lightly the situation has affected us so far. In the EEC countries as of 31 March 1982, 35,998 people, or 8 per cent of the total steel work force, were on short time and up to May 1982 job losses were 94,600, or 14.8 per cent of the total work force. That gives some indication of the magnitude of the problem and how other countries have suffered.

I was asked for the full production capacity figure of the Irish Steel mill: it is 345,000 tonnes. The projected figure of 250,000 tonnes was not expected to be reached until 1986-87 and those projections had to be recast. The number affected by the three-day week will be 500 out of 637 people employed. This move is part of the day-to-day working of the company and it is for management to decide how it is to be implemented. The IDA grant for Irish Steel is £4.1 million. Deputy Boland asked if EEC loans in [192] relation to steel closures had a detrimental effect on the prospects of the IDA attracting industry to this country. It has had an effect because that fund has been used to top-up incentives in other parts of the EEC which made it possible for other areas to attract industries which might otherwise have come here.

The importation of 11,000 tonnes of Argentinian steel was raised. Only my Department lodged a complaint in advance of that steel coming here.

Mr. B. Allen: Information on Bernard Allen  Zoom on Bernard Allen  When was the date?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I do not have the date.

Mr. B. Allen: Information on Bernard Allen  Zoom on Bernard Allen  It was 15 June.

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  Irish Steel also lodged a complaint. The real difficulty is that one has to establish that it is being sold at an anti-dumping price. While it may appear to be so, one still has to prove it, which is a very slow and complex matter. Such importations are tied up in very complicated EEC agreements and we do not have any legal basis on which to stop them.

I was asked if I was certain that all the steel used in the Irish construction industry comes from Irish Steel and if there is any way I can ensure that that will happen. In the interests of Irish Steel, the economy and the work force, I appeal that where possible the construction industry should use Irish Steel. It is very difficult to give the guarantee Deputies are looking for. To go to a building site and pick up a round steel bar and say it is an Irish steel bar or an Argentinian steel bar is very difficult but it is part of the Government's proposed economic plan that an attack will be made on import substitution.

Recently I saw 28 baths, bought outside our area, being installed in a local authority housing scheme because they were 48p each cheaper than those being made in the locality. We have become very complacent about public sector purchasing. Since I took office I have undertaken to issue a directive to ensure that Irish goods are purchased where possible.

[193]Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  Are we not in control at the point of entry?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  We have to operate within the EEC tariff and trade agreements which are made not to restrict trade but to enlarge it. As the recession worsens most countries are trying to do what they can to protect their own industries. We have to operate within the agreements to which we are a party and if we talk about breaking them we may risk the danger of protectionism creeping in, even more than it has done so far, and this would damage our record. We must strike a balance.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  Is the Minister saying we must import from EEC countries?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The EEC have very complicated tariff and trade agreements by which we are bound and they cover bringing in steel from outside the EEC.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  That is not relevant to Argentinian steel. We know at the point of entry——

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  Argentina is entitled to export steel to EEC countries. That is the point I am making.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  Even though we are overproducing, there is an agreement to import from countries outside the EEC?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  It is part of the existing agreements that this steel can be imported into the EEC countries and I cannot stop it.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  And we have no control over it?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I have explained that we are a party to very complicated EEC agreements. Deputy Boland raised the question of prices. The pricing rules that have been applied to steel producers for several years oblige them to adhere to published price lists which must be aligned on the prices prevailing in the [194] area in which the producer wishes to sell. This system had limited success because the steel dealers were still involved in price competition and brought pressure to bear on the producers to provide hidden discounts and rebates which negated an increase in the prices. In order to achieve some raising of prices therefore, the Commission introduced a decision which extends to dealers the obligations on producers, namely, that the price list must be published and adhered to, prices must be arrived at by a process of alignment and no significant price under-cutting is permitted. The decision currently applies to dealers handling over 12,000 tonnes per year but it has been agreed that this threshold will be lowered to 6,000 tonnes for ordinary steel and to 3,000 tonnes for special steel. This has been accepted by the Irish National Association of Iron and Steel Merchants.

Scrap is Irish Steel's basic raw material and at full production it will be necessary to import about two-thirds of the total requirements after taking up all scrap available. It is the policy of the Government to prevent the export of scrap to non-EEC countries except where Irish Steel do not require it.

On the question of energy, it is true that the company are very heavy energy users. They have taken steps to reduce their energy costs by having an energy savings programme and they are at present in discussion with the ESB in relation to a priority rate. At the moment they use a small amount of natural gas.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  There was also the question of black oil.

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I have taken the point made by the Deputy and I will have it investigated. I think I have answered all the questions raised. I was glad to hear various views that were expressed. Irish Steel find themselves in a difficult situation but it is part of a major world wide problem. The Government have to ensure that any future investment that is made will be sufficient to make the company viable and, if not, to look at alternative measures. In the interest of prudent financial management, of which we [195] have heard so much and which we are going to hear much more about in the future, we will have to ensure that we get value for money.

Mr. B. Allen: Information on Bernard Allen  Zoom on Bernard Allen  The Minister has been most forthcoming in his reply. He said we seem to have no control over the importation of steel produced in the EEC or steel produced outside the Community. Since the EEC is now overproducing, does the Minister not consider that we should cease importing from outside the Community? It seems crazy that we continue to import into the Community a commodity that the Community is overproducing.

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  There is an overcapacity of 30 million tonnes of steel. I made the point to the Commissioner.

Mr. B. Allen: Information on Bernard Allen  Zoom on Bernard Allen  We are still importing from Argentina.

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  The EEC is importing steel from Argentina and some of it found its way here as part of a quid pro quo agreement that exists. Other agreements exist in relation to US steel also. It is an attempt to get some stability in the market.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  Our friends in the EEC have their own standards, as I found out recently in relation to agricultural produce. We are an island nation and our construction people have the benefit of IDA grants and they work throughout Government agencies. Without shouting it at the top of our voices, surely we could lay it on the line that they buy Irish or else?

Mr. Reynolds: Information on Albert Reynolds  Zoom on Albert Reynolds  I have done that and I intend to keep on doing it.

Mr. Hegarty: Information on Patrick Hegarty  Zoom on Patrick Hegarty  I am very glad to hear that.

Question put and agreed to.

Agreed to take remaining Stages today.


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