Dáil Éireann debate -
Thursday, 27 Oct 1960

Vol. 184 No. 2

Irish Steel Holdings Limited Bill, 1960—Second Stage.

Minister for Industry and Commerce (Mr. J. Lynch)

I move that the Bill be now read a Second Time. The House is aware of the purpose of this Bill. It will be recollected that, in advance of its introduction, the House on 22nd March, 1960, and 19th July, 1960, voted a total of £1,500,000 to enable the Minister for Finance to purchase shares in Irish Steel Holdings Ltd., and thus put that company in a position to purchase plant and put other work in hands in connection with its expansion plans.

It is, no doubt, known to the House that the company was incorporated in 1947 to acquire the assets of Irish Steel Ltd. and maintain the steel works at Haulbowline as a going concern. The company has been financed by bank accommodation, of which £150,000 is guaranteed by the Minister for Finance, by a loan of £150,000, similarly guaranteed, and by the trading profits of the company since its inception.

The company operates open hearth furnaces to produce, largely from native scrap, mild steel ingots and billets which are then converted by rolling into angles, rounds, flats and squares. Flat and corrugated galvanised sheets are produced from imported sheet. The soundness of the industry has been confirmed by the successful progress of the company over the past ten years. Accumulated net profits up to 30th June, 1959 are over £600,000 and the assets of the company were valued by outside valuers at nearly £1 million.

For some years, the company has been considering plans for development and expansion of the industry and latterly has pursued its investigations with consultants employed for the purpose. Proposals were drawn up and tenders obtained from firms of international standing. These tenders form the basis of the company's statement of costs.

The main proposals are:

(a) increase of ingot output to 80,000 tons per annum of 30 cwt. ingots from the present figure of 23,000 tons per annum of 3 cwt. ingots. This will involve the installation of a new 60-ton furnace, the improvement of two existing 37-ton furnaces and extension of scrap handling;

(b) installation of a new 750 mm blooming mill and a new 650 mm large section mill, with the necessary ancillary gear to roll billets, blooms, sheet bars and large sections;

(c) rearrangement and mechanisation of the existing merchant bar mill to improve its rate of working and to enable it to feed a wire rod mill;

(d) installation of a modern wire rod mill;

(e) completion of an incomplete sheet mill already in the company's possession. This mill was acquired in an incomplete condition from Irish Steel Ltd., the company's predecessors.

The output and efficiency of working will be increased by these means and the range of products extended. The 80,000 tons of ingots per annum will give about 65,000 tons per annum of end-products, of which it is intended to dispose as to 45,000-50,000 tons on the home market and 15,000-20,000 tons on the export market. The company's successful experience in the export market encourages confidence that in normal conditions there should be no difficulty in securing export outlets for whatever portion of production is not absorbed in the home market. This confidence is shared by the export agents who handled the company's previous export business.

On the basis of carefully and conservatively derived costs of production, the company has reached the conclusion that its delivered prices should be competitive with those for imported steel when the plant is working at its true efficiency and planned output. Employment in the expanded steel-works is expected to be over 700 persons at peak periods, or 200 more than at present.

It is expected that the total cost of the work and plant necessary for this implementation of the company's development and expansion programme will be of the order of £3½ millions. It is proposed to provide the sum necessary, less £99,000 which the company will provide from its own resources, by the purchase of shares by the Minister for Finance. In addition, the company will require working capital and for this purpose the Bill empowers the Minister for Industry and Commerce, with the consent of the Minister for Finance, to guarantee borrowings by the company not exceeding £500,000 at any one time.

I think that there will be general agreement that this successful industry should be fostered and encouraged to expand. Its importance from the point of view of providing employment is apparent from the figures I have already quoted. Quite apart from questions of employment, however, the steel mill at Haulbowline fills a gap which would otherwise exist in our industrial capacity. It produces a basic product, principally from indigenous raw materials, and represents a valuable insurance against our being deprived of essential supplies of steel should we be unable to obtain supplies from foreign sources at any future time of international difficulties. Furthermore, we may hope that the existence in this country of this basic stage of the steel industry with its special skills and technologies will be a favourable factor in the development here of the engineering and other steel-using industries. For all these reasons, I confidently recommend the Bill to the approval of the House.

Mr. Cosgrave

As the Minister said in his introductory remarks, the work being carried on by Irish Steel Holdings Ltd. at Haulbowline is a desirable project. We support the proposal to continue and expand the capacity of Irish Steel Holdings Ltd. which has been providing not only good employment but producing mild steel ingots and billets of satisfactory high quality. It is, I think, ten or 15 years since I visited the Haulbowline works and since then the company has continued to make progress. Like others, I was impressed by the skill and efficiency with which the undertaking was carried on.

It is obvious from the published accounts that the company has been trading successfully. It strikes me, however, in view of the satisfactory financial results which have attended the operations of the company, that the company might out of their own resources provide a larger sum than £99,000. As I understand the Minister's remarks, the expansion programme will be of the order of £3,500,000. I have here before me the accounts which were presented for the year ending June, 1959. At that stage, the company had reserves of the order of over £300,000. I gather from the Minister's remarks now that they have available a sum of £600,000; and it does seem, in view of the quite considerable reserves, that the amount being provided by the company is relatively small. That aspect of the financial arrangements might receive consideration.

There is also the general question of whether an undertaking of this sort should secure its capital by inviting public subscription. This matter was referred to here, I think, in July, and I do not know whether it has since received any further consideration. While many of the projects which are assisted directly by the State benefit from the various National Loans which are floated, there is, I believe. a psychological advantage in getting the public to understand that, when subscribing for a particular undertaking, they are contributing directly to a named project. That, of course, has been the case in respect of the E.S.B. and C.I.E. Whether this particular undertaking is sufficiently well established to undertake a similar procedure is a matter on which the Minister may be able to give us information. Generally, we are satisfied with the work which is being carried on there. Not only has the undertaking of Irish Steel Holdings at Haulbowline produced satisfactory goods but the management of the company reflects credit on all concerned.

I note in the main development proposals that one of the projects is the completion of an incomplete sheet mill which is in the company's possession. That mill was shown to me on the occasion on which I visited the place and I am glad to see that the proposals envisage the completion of that work and further development.

There is only one other question on which I should like some information from the Minister. Have the export agents who handle the export business of the company access to world markets generally or are they restricted to any particular sphere? I believe that in an undertaking of this sort access to the widest possible sphere of activity is desirable.

I should like to support the project and wish the development every success.

Mr. Corry

I feel very happy in seeing these proposals brought in here today to be put through the House. There is no doubt that when the steel works were first started in Cobh, Cobh was a derelict town and had been a derelict town from the time that the British left Haulbowline. Over a long number of years the only activity in Haulbowline was an auction of scrap and machinery every three or four months. That was the sole activity in a place where employment had been given to 1,000 to 1,500 people during the time the British had it as a naval base.

When I hear Deputy Cosgrave allude to capital by public subscription, I cannot forget that capital was brought into this firm by public subscription at the start. I am wondering what has happened the shareholders who invested their money at that time. Many of them were very poor people who endeavoured to help out at that period by putting their little all into the industry. What is their position today?

I do know that the firm went bankrupt at least twice. On at least two occasions I had to go to the present Taoiseach, then Minister for Industry and Commerce, to get money from him to keep the industry going. The gap it filled in the economy of this country during the years of the emergency cannot be forgotten. We would have been absolutely without iron or steel for agricultural machinery and other necessary purposes had it not been for Irish Steel.

We were very fortunate in the manager who took charge of the industry over the past number of years. Mr. Christy Fitzpatrick who took it over after its bankruptcy brought it to a level of which any industrialist could be proud. Mr. Farren has followed in his footsteps and has made a very good job of the industry. Now, thank God, it is being expanded.

Is it visualised that we are to continue to import black sheets for the purpose of galvanising them there and selling them here or are we to get the famous sheet mill completed and have black sheets produced? I recollect when another industrialist thought of starting a corrugated iron industry here he was informed by the late David Frame that he could not go to England for black sheets because he had got a licence to make them in Haulbowline. That was in 1936. It is a pretty long time since the Department of Industry and Commerce gave a licence for the manufacture of black sheets in Haulbowline. There is the amusing state of affairs that black sheets are imported from a cartel in Britain to which we have to pay through the nose; these sheets are galvanised and sold to the Irish people. There is a supposed grant to agriculture, which is actually a grant to cover this, in the form of grants for the erection of hay barns and so on, on condition that Irish galvanised iron is used. It is time that that ended.

I have a very distinct recollection, because I took a considerable part at that time in the negotiations, that we wrote to Belgium for an option on black sheets. The reply was that they could not supply us because the trade in the Irish Free State had been handed over to the British Steel Combine. We also wrote to Krupps and got the same reply. It was only on the intervention of our late esteemed friend, Mr. Hitler, that Krupps were induced to tender. The tender from Krupps for black sheets in 1936 was £4 10s. a ton under the tender of the cartel. I wonder if that condition of affairs still prevails and whether we are paying through the nose to a cartel for black sheets and then pretending to give a grant to farmers for putting corrugated iron on haybarns.

I would, therefore, be very anxious, now that we are expanding in that line, that the sheet mill would be finished and that black sheets would be turned out there instead of being imported from Britain. In view of other discoveries that we have made in regard to our agreements with Britain recently, I do not think we owe them anything such as paying them excess prices for raw materials or semi-manufactured materials. That is a matter for another day.

I certainly would like to compliment the Government and the Minister. This is not the first occasion on which the Taoiseach has come to the rescue as far as Irish Steel Holdings and the livelihood of the large number of people employed there are concerned. This is a well-run firm. The workers are decently paid. Its success is a commentary on the arguments of those who are so anxious to get back to private enterprise and who speak of private enterprise at various stages. This is run as a State concern and the figures show it is run at a profit. Along with that, it is run efficiently and gives an enormous amount of employment in a town and in an area which needed it badly. We can all compliment the management who have brought about that happy condition of affairs. As the representative of that constituency for more than 30 years, I wish to congratulate them. I remember when this project started. Private enterprise tried twice and failed and the State made a success of it. I compliment the Minister and the Government on this step to expand the industry.

Sir Anthony Esmonde

One must support anything that is instrumental in providing further employment. However, there are certain provisions in this Bill about which I do not feel quite happy. In the first instance, I should like to ask the Minister if this is a private or a State company. I assume that it has directors; in any case, it must be partially a private company because it has been in existence for some time. Assuming it is a private company, is it the policy of the Government to nationalise private companies, because looking into this Bill, that is what appears to me to be happening? The statement the Minister has read out indicates that this company shows a profit of £600,000 a year and that the assets are £1,000,000. Why is this company, in respect of the very laudable expansion it wants to make, unable to go on to the public market like any other private company and secure the funds that are so necessary for its advancement?

Yesterday there was an announcement that a loan of £15 million was being floated. Looking into the Bill here, I see that the Minister for Finance may take up shares to the extent of £4 million. It is very possibly a fact that the £4 million of State money is not to be invested in this company, but in the Bill there is power for the Minister for Finance to expend £4 million on Irish Steel Holdings, Ltd.

I am surprised that we have only two Cork Deputies in the House to hear about the great benefits being conferred on Cork county. We in Wexford, the constituency I have the honour to represent, have some slight interest in Irish Steel Holdings. Some years ago, the two agricultural firms there approached me to ask if I would go to the then Minister for Industry and Commerce and ascertain if it was possible for these firms to buy their steel on a free market. They told me that they were allowed to buy steel on a free market in Belgium, the United Kingdom or wherever else they could buy it, provided they were exporting, but for home production, they had to buy from Irish Steel Holdings and they had to pay as much as 30 per cent. more for their raw material from Irish Steel Holdings than the price they could have bought it for outside the country.

All this happened long before the present Minister's time, but I made a very reasonable approach on behalf of the firms in my constituency that they should be allowed to buy on a free market. They assured me that if they were allowed to buy on a free market they would be able to continue what they were then doing, exporting on a free market themselves without any protection whatsoever. That was refused by a Fianna Fáil Minister, and, in case the limited number of Fianna Fáil Deputies here should take exception to what I say, I hasten to assure them that it was subsequently refused by the Minister who succeeded the Fianna Fáil Minister. The net result was that these two old Irish firms in Wexford were forced to look for a protective tariff. Up to that time, they had been exporting on a free market and had been able to export to the British market. They were working without any tariff and they are no longer able to do that. Irish Steel Holdings had the benefit of that. These firms had to buy their raw material from Irish Steel Holdings.

I wonder if I came to the Minister for Industry and Commerce tomorrow and said that these companies in Wexford, based largely—in fact based entirely—on home raw material, were in a parlous condition and wanted assistance on a big scale, such as Irish Steel Holdings got, would we get it or not. Any enterprise that provides employment in the unhappy situation in which we find ourselves at the moment is eminently desirable. I notice that 700 people will be employed, which is 200 more than before. These steel works were erected on the site of the old dockyard when it was closed, causing a considerable number of people to emigrate. As Deputy Corry stated here, at the time it was created it supplied the necessary raw material which up to then was not available.

However, every time I open a newspaper or every time I listen to a speech by a Minister of this Government, from the Taoiseach down, I hear the argument—and of course it is a sound argument—that, in present world conditions of free trade and liberalisation of trade in other countries, we must be competitive in our exports. Here is an industry with profits of £600,000 and assets of £1,000,000. I do not know if this is a private company but I believe it is and if it is a private company, surely it could get this money on the public market. There is a limited amount of money available for State enterprise. The more money got by private industries on their own initiative, the better.

Supposing the £4 million in this Bill is utilised and this company says: "We require the Minister for Finance to take up that amount in full within the next 12 months", it will make a very big hole in the loan. It is also possible that the banks may find themselves having to interest themselves in this loan, thus absorbing available funds.

I wonder is this a move in the right direction. I can understand any Cork Deputy who may be listening to me taking exception to what I say. I can appreciate that it is every man for himself. First of all, is this a private company? If it is a private company, is it a wise move to place it under what is virtually State control, to guarantee the loans and give it money? It is further embodied in the Bill that the money is to be voted out of the Central Fund. If the money is not paid back, it is in the Bill that the Oireachtas will vote the money to see that the State is not at a loss. Is it not, in effect, saying: "We know you want to expand and we know you want to give further employment; therefore we will give you this money"? Could not any other company in the State come to Dáil Éireann and submit that it is entitled to the same terms? I wonder is it a good thing in the first instance to encourage a private company to become a State company as we are doing.

Mr. J. Lynch

It is not a private company.

Sir Anthony Esmonde

I am wondering also if it is a good thing to give a company, even though it is providing increased employment, a more or less blank cheque up to a ceiling of £4,000,000 to expand as much as it likes. Could we not reasonably say that every other company which is giving useful employment could ask for the same amount of money? The Minister may say that they can get the money from the Industrial Credit Company but the money is limited. The money available within the State coffers is provided by the people and is limited in amount.

I have always been an advocate of private enterprise and I wonder in this case, where a company are showing such excellent returns—and also not forgetting what I said about the Wexford company—and where they are already getting considerable benefit from the State, if we are wise to give them all this money. I should like to have the Minister's clarification on the matter.

Mr. MacCarthy

Like other Deputies, I welcome this Bill. The industry is an essential one in relation to production and availability of steel. In the early stages, of course, private enterprise was associated in a very big way with this new enterprise, but everybody understands that in that period there was a difficulty in getting up-to-date equipment and perhaps also the amount of technical knowledge available in the country was not such as to make for the desired success of the industry. Consequently, changes had to come and the Government had to take over, in a very big way, a financial interest in the concern, if it was to survive. Not only has it survived and supplied a large part of our essential steel material but it has established a very successful export trade, even to far-off lands. It gives considerable employment not alone to people from Cobh but from the whole of the harbour area and we can welcome the further expansion proposed by the Minister by reason of the fact that a modern shipbuilding yard has been started nearby, so that it will have a market available for at least some of its products. As time goes on, it may be able to supply much more of the needs of that shipbuilding industry.

It is like the E.S.B., Bord na Móna and other projects of that kind. It is too big an industry for private enterprise. Furthermore, the more big projects of that kind take from the available public funds, the less public funds there will be for an extension of private enterprise. But it is really such a large and important industry that the Government are wise in the steps they are taking now and I am sure the Bill will have the approval of the House.

Mr. J. Lynch

I shall deal with the points in the order in which they were raised. The first matter I have to deal with is the question by Deputy Cosgrave about the £600,000 the company might have been presumed to have available to help finance this undertaking. As the Deputy will remember, in the opening part of my speech, I said that the company showed a profit of £600,000 up to 30th June, 1959. The new plans had not then been formulated and that £600,000 was the figure before deduction of taxation. Taxation reduced that figure to £400,000. At that time, as the Deputy will have learned from my opening remarks, there were available to the company two sums of £150,000 each raised from different sources and each guaranteed by the Minister for Finance. So, with the £400,000, after tax, at June, 1959, available added to the £300,000 to which the company had access by way of loan, there was £700,000. Of that £700,000, it had in the meantime ploughed back about £100,000 into fixed assets and the balance of the £600,000 was being used in the meantime for working capital. There are, of course, as liquid assets available for contribution to the present development plans—again, as I announced, £99,000—which were duly contributed to the £3½ million to be made available for the capital undertaking by the Minister for Finance and the £500,000 by way of working capital that the Minister is also providing.

Like Deputy Cosgrave, I also was very impressed when I went to visit Haulbowline Island for the first time for the purpose of looking over the steel mills. I went there before the plans were presented to me and prior to their presentation to the Government. Naturally, I was anxious to familiarise myself as much as I could with many of the technical terms I have used in introducing the Bill and with the operations, so far as I could become familiar with them, so as to be in a better position to explain it, not only to the Government but to the House at a later stage. What particularly struck me was the obvious enthusiasm, not only of the directors but also of the executive and technical staff and of the workers. I am satisfied in my own mind, having regard to their record up to that date, and to the enthusiasm they were showing, that their plans have a very good chance of being successful.

May I say at this stage to Deputy Esmonde that it is not a private company? I am sure the Deputy did not want me to interrupt him because he was glad to get his old conservative teeth into this rather socialist bone. He can take my assurance, as I am sure he knows, that it is not a private company but a company formed by the Minister for Finance. It has three £1 shares which are divided among each of three directors, who are serving or former civil servants. There are at the moment two serving civil servants and one former civil servant on the board.

It was a private company before Irish Steel Holdings Limited came into existence; it was then Irish Steel Limited and, as Deputy Corry says, the company failed and its affairs were put into the hands of a receiver. At that time, among some other debts, the company owed £69,000 to the Minister for Industry and Commerce for a trade loan advanced to them. That, in turn, had to be paid by the Minister for Industry and Commerce into the Exchequer. When the assets were taken over, some £125,000 was paid for them and of that sum, the £69,000 which was owed by way of trade loan was paid into the Exchequer. From that date it became a State company and it still continues as such.

I am afraid I have no personal knowledge of the circumstances of the company prior to that take-over but since then, through many difficulties, it has succeeded very well to the point that it established for itself an export market, even though a small one, which it holds to the present day. One of its bigger export customers happens to be as far away as New Zealand and that in itself, I think, is a good test of the quality of the work done at this steel mill.

Before passing from that I should refer to another point made by Deputy Esmonde, that if the two iron product factories in Wexford were given opportunities for free trading they would have a substantial export market. The position is that we have a very liberal import regime and the manufacturers can buy their raw materials from any part of the world subject, of course, to their not being available on the home market. These are all materials destined for export markets and there is no difficulty for any manufacturer in procuring such raw materials or semifinished products from any part of the world so long as they are to be re-exported in finished form. Therefore, there is no impediment to the Wexford companies in regard to the import of raw materials or semifinished products.

Sir Anthony Esmonde

I think the Minister has missed the point in what I said——

Mr. J. Lynch

I was coming to it. So much for the export side. The Deputy went on to say that so far as the home market was concerned, they felt they could compete successfully with any imported manufacturers if they had permission to get their steel sheets and bars in the cheapest market. I think the protection afforded to Irish steel prevents that because they are obliged, in so far as the Irish company can supply them, to buy from Irish Steel. But I think the policy was well founded because, until such time as we could get the basic industry established here, the Wexford companies would have to depend on imported raw materials or semi-finished steel for the success, or even the continuance, of their operations.

As I said in the opening statement, the existence of Irish Steel and the more favourable we make it the better the prospects will be for existing iron product manufacturing companies to continue in operation and the better will be the opportunities for new manufacturing companies to come into existence. While there are irritants, and while there may still be irritants for some existing companies, I think in the long run the policy crystallised in this Bill is in the national interest.

Sir Anthony Esmonde

But they must pay more for the steel they buy in Cork than they would have to pay if they imported it. That puts up their cost of production.

Mr. J. Lynch

I cannot deny that but at a time when world conditions were such that the Wexford companies were unable to get steel from abroad they had steel from the home industry which is largely based on the smelting or processing of steel from scrap arising on the home market. It would, of course, be ideal if we could smelt all in this country and one does not know when that day may come, but we are not in any way unique in our present mode of operation because I think almost every steel industry in the world, with the possible exception of those in the U.S.S.R., have to depend on scrap arriving on the home market.

Deputy Corry suggested that there was some form of cartel which restricted the production of Irish steel in corrugated sheets. I know nothing about that but my remarks to Deputy Esmonde would apply there, that Irish Steel were not confined to the British market for the material from which they fashion corrugated sheets at Haulbowline. Apparently, he said, Messrs. Krupps of Germany tendered at a lower price than that at which the British company that had been supplying Haulbowline were able to tender but they were not even then— and I do not know how many years ago that was—confined to either British or German markets. They could get sheet steel from any part of the world at competitive prices. Fortunately, now with the completion of the sheet mills which these plans envisage, the manufacture of corrugated iron will go back a couple of stages, that is, we shall be making our own sheet and bars as well as blooms in the blooming mill and then later it will be fitted with ingots for the purpose, ultimately, of making our own sheets.

I think whatever difficulties arose in the supply of black sheet in former years will no longer prevail when the sheet mill has been completed. I do not think any other points were raised that call for a reply but I am glad that the Bill has met with such a good reception. It is just what I expected. I am sure we all wish the plans now outlined in the company's proposals will be successful and will come to fruition at an early stage.

Sir Anthony Esmonde

May I ask the Minister a question? Even though it is a State company is there any reason why the money should not be sought on the public market?

Mr. J. Lynch

That is a point that I overlooked in my reply. Deputy Cosgrave referred to it today and also when the Supplementary Estimate was before the House last July. Consideration was given to the manner in which the capital necessary would be provided and it was decided, after close examination, to provide it in this way, but there is in the Bill—I think in Section 4—provision whereby the Minister for Finance may dispose of his shares should a flotation by way of public issue ever become desirable. It is possible that stage will be reached and I think, as in the case of Comhlucht Siúicre Éireann, it would be a desirable stage as it would take this activity out of the category of State enterprises. When a favourable time is deemed to have come, I am sure consideration will be given to the possibility of using the powers conferred on the Minister for the disposal of his shares as set out in Section 4.

Question put and agreed to.

Committee Stage ordered for Wednesday, November 2nd, 1960.