Mal Evans, Co-Founder of Shropshire fabrication company Ferro, looks at the current challenges facing the UK steel industry and its supply chains, and explores some of the ways local manufacturers and engineers can work together to reduce costs.
The war on Ukraine – home to seven of the world’s biggest steel mills – predictably had a huge impact on raw material prices. On top of the challenges of Brexit and COVID, steel production’s been pushed further and further afield, putting severe pressure on UK steel stockists and supply chains.
China is not the solution this time; rising operational costs coupled with the cost of shipping to the UK mean it’s no longer as economically viable as it once was.
Another challenge is the environmental issue. The traditional, carbon-intensive steel production process puts it amongst the world’s top pollutants, and we’ll begin to see governments penalising manufacturers for producing CO2, resulting in further price hikes.
The alternatives, however, are slow to emerge; Sweden’s just opened the world’s first hydrogen-powered steel plant and it’ll be interesting to see how that evolves, but even if it proves successful, it could take decades to roll that out on a wider scale.
What does this all mean? At some point in the near future, we may have no choice but to restart the long-scrapped UK steel industry. Reshoring will help us become more self-reliant, especially if we can find the right technologies to make steel production more environmentally sustainable.
Ahead of this shift towards localisation, there’s a lot we can do as an industry to support ourselves – and each other – and one of the biggest opportunities for UK engineering firms and manufacturers is around transport.
Large steel products, for example – like the frames we fabricate here at Ferro – often need to be moved between several different suppliers at various stages before they reach the customer. Every long journey adds cost and contributes to carbon production, making the process less efficient.
These costs can be immediately reduced by choosing local suppliers, but the benefits of hyper-localisation go deeper than that. Fewer road miles and supplier switches means less damage to the product, more dependable ETAs, greater capacity to scale up, quicker resolution of issues and tighter quality control; all of which result in greater customer satisfaction.
We can also collaborate more with other manufacturers, engineers and processors in our area, even if they’re operating in different sectors, to collectively reduce transport costs and emissions. We can look more closely at what’s happening in our area and consider joining forces with other businesses to consolidate loads. Creating and securing local jobs is also essential.
There are a few more barriers to hyper-localisation, though. Many years ago, every town had its own manufacturing base with common skillsets that were relevant to that industry. That’s been dissolved as processes have been centralised or moved abroad, so skills are now confined to specific areas. Luckily, most of the skills we need are held here in the Midlands, but there are still processes we can only get done in the North East or South East.
The government must do its part; there needs to be more encouragement of decentralisation and localisation, so that our skills are diversified across the UK and are more easily accessible. Localisation would also overcome a lot of our issues with transport costs, delivery times, air pollution and congestion by taking more lorries off the motorways.
Unfortunately, though, there’s often a tendency to wait until we’re forced to do something; nowhere has that been more obvious than the climate change issue and the electrification of cars. Until then, it falls on each of us to be more responsible and take a more proactive approach.