Seanad Éireann debate -
Wednesday, 10 Mar 1971

Vol. 69 No. 13

Irish Steel Holdings Limited (Amendment) Bill, 1971 (Certified Money Bill): Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister for Industry and Commerce (Mr. Lalor)

The Bill proposes to raise the ceiling of borrowings which may be guaranteed by the Minister, with the consent of the Minister for Finance, for Irish Steel Holdings Limited from the present limit of £1 million to £3 million.

Irish Steel Holdings Limited are a wholly owned State company with equity capital of £6 million subscribed by the Minister for Finance. Crude steel is produced in the company's mill at Haulbowline from basic raw materials in a single open hearth furnace. The principal product of the firm is reinforcing steel bars for the building industry.

The company are embarking on a major expansion of its steel making capacity following a detailed study of its operations and potential by external consultants—Messrs. Guest, Keen and Nettlefold. A second furnace, which will be an electric are furnace, is to be installed and there will be additions and modifications of the rolling mills and other parts of the undertaking.

The proposed expansion will almost double the basic output of steel ingots, bringing it up to between 135,000 and 150,000 tons per annum. A major consideration in this scheme is the introduction of processing by electric are furnace. This will give faster and more flexible production and will also open up the possibility of getting into the more lucrative side of the trade in special steels for the export market. It should be mentioned that while this expansion will give a greatly increased capacity for ingot production, the addition to the employment force will be a modest one. The company at present employ 830 and the numbers may go up to about 1,000.

The main factor in the scheme is that the more up to date electrical process should reduce the company's unit costs of production to a more competitive level and thus assist the company to face the competition of free trade. This development of the mill will, I hope, be only the first of further expansions but progress will depend on the efforts of everybody connected with the company to make it an efficient and competitive undertaking.

The estimated cost of the present expansion will be in the region of £3 million. The company are proposing to finance the scheme from its own resources and from borrowing over a fairly short term. The company at present has borrowings of £½ million guaranteed by the State. The Bill before the House will increase to £3 million the amount of loan which may be guaranteed by the State although the loan required for the present transaction will not reach this figure. The company have built up some resources from their profits particularly during the past three years.

There are other related amendments to the Principal Act proposed in the Bill. Section 2 (b) is to enable the State to give a guarantee where credit is got from a supplier of equipment on a deferred payment system instead of outright loan. This amendment is in line with legislation for other State companies. Section 3 (1) is to deal with the position in which this company's first loans were guaranteed under the State Guarantees Act, 1954, before the passing of the Irish Steel Holdings Acts, 1960 and 1963, and to bring all loans guaranteed into the one group. This will enable a single statement of guaranteed borrowings by this company to be given annually to the Oireachtas.

I feel sure that the object of this Bill will commend itself to the Seanad and I recommend the Bill for approval.

Mr. Russell

The Minister can be assured of the approval of the Seanad to the Bill. It offers us an opportunity to congratulate Irish Steel Holdings, particularly on their progress during recent years. As the Minister said in his introductory statement, the object of the Bill is quite simply to increase the borrowing powers of the company from £1 million to £3 million. Of that increased borrowing facility the company propose, apparently, to use only a small amount.

The purpose of the extra capital is one that we strongly support. It will enable the company to introduce a new and up-to-date method of steel production which will increase capacity and lower costs. At this stage, when we are almost of the threshold of entering the Common Market or free trade competition, it is absolutely essential that all industries—in particular the State industries—should equip themselves to face the competition of worldwide companies and manufacturers. Every Member of the Seanad would support the view that any steps to rationalise or modernise State companies should be availed of. Whenever any Minister finds it necessary to come to this House for the necessary finance to carry out these modernisation programmes, he can always be assured of a very warm welcome from this House. I should also like to commend the method of financing which this particular State company are using in this instance. It is very heartening to read of a company—and I do not wish to cast any aspersions on any State or private companies in this regard—which propose to finance these additions largely from their own resources. Although they are getting increased borrowing powers, they do not propose to avail completely of these powers.

A look at the balance sheet of Irish Steel Holdings will indicate the sound and progressive policy which the directors have pursued, particularly in recent years. That is the reason why they are in the happy position of not having to call on the taxpayer to assist them in modernising their mill.

The Minister has mentioned that, although the proposed rationalisation programme will lower costs and make the steel mill more efficient, it will not very substantially increase employment. In these days, when unfortunately we hear almost weekly of factories getting into trouble for one reason or another, an increase of 170 people is a very important addition to the labour force. Any further additions on top of this that would follow increased export sales would, of course, be very welcome too.

I should like to ask the Minister a few questions generally on the question of steel production in this country and perhaps he might be good enough to refer to them in his reply. What are the sources of raw material? Are Irish Steel Holdings completely dependent on scrap and from where do they purchase that scrap? Is it imported or collected from home sources, or both? Has any consideration been given by the board of Irish Steel Holdings to the treatment or smelting of iron ore from abroad? In other words, I feel in the long term, that if Irish Steel Holdings are to continue as a viable proposition in the face of European competition they will have to be organised in greater depth. I think it is not too fanciful to suggest that at some future date they should consider the importation of ore from abroad, probably even from as far away as Australia, and the smelting of ore to provide the raw material for steel production.

In this connection, it might be of interest to Senators to hear that within the last two years the Limerick Harbour Commissioners commissioned a study from an international firm of consultants in regard to the possibilities of transhipping ore from as far away as Australia. It does become an economic proposition if the size of ships reach something like 300,000 tons. With the huge expansion in shipping and the size of ships, I do not think we are looking too far ahead in anticipating that within the next three, four or possibly five years you will have ships big enough to carry iron ore from as far afield as Australia and to bring it into the Shannon, tranship from there, if necessary, to a smelter at Cork, or preferably in the Shannon area, and make it a viable proposition.

I should also like to ask the Minister what will be the position of Irish Steel Holdings when they have to face the full blast of competition from the huge steel mills in the United Kingdom and on the Continent? Has any consideration been given by the directors to a possible merger with one of the bigger steel mills, or one of the bigger industries in the production of steel products, such as the consultants who were brought in to advise Irish Steel Holdings—Messrs. Guest, Keen and Nettleford—who apart from their interest in advising the development of Irish Steel, also have an interest for quite a number of years in a wire mill in Limerick, Irish Wire Products Ltd.? Is it possible that Irish Steel Holdings could manufacture the type of steel rod which Irish Wire Products in Limerick and other wire drawing firms could use? I have particularly in mind the large new factory which is to be established, and the construction of which is now under way, on the outskirts of Limerick to manufacture steel cord for tyres and which will be using, as the Minister I am sure is fully aware, a very substantial amount of steel wire in its production.

I should like to think that the directors of Irish Steel Holdings have shown themselves to be progressive and fully alive to the changing situation in Europe and will carefully consider the organisation of their factory in greater dept, both from the point of view of raw materials and of widening their range of products. I may be quite wrong but I do think that, unless some organisation or some development like this takes place, Irish Steel Holdings in the years ahead may find themselves in a very difficult situation vis-à-vis the giant steel mills of the Continent and the United Kingdom.

I should also like to ask the Minister if any consideration has been given by the directors of Irish Steel Holdings to apply for membership of the European Coal and Steel Community when and if we enter the EEC. Finally, a very small point—one to which perhaps other Senators may have the answer but I have not—is why is the name of the company "Irish Steel Holdings"? Is it possible to drop what seems to be an unnecessary word in the title? Why could it not be "Irish Steel", just simply that title without adding the word "Holdings"?

If the Minister in his reply would touch on some of these points I have made I would be very grateful, or if he can add any further information on the future plans of Irish Steel Holdings I am sure this House would be very interested to hear them. I should also like to inform the Minister of the full and warm support of my party on this Bill. Certainly, he need not be in any way reluctant to come back again if the necessity arises for further capital to expand what is very obviously a successful Irish enterprise.

Mr. Gallanagh

I should just like to ask the Minister if we could have co-operation on a particular matter. Although Irish Steel Holdings have built a bridge from Ringaskiddy into Irish Steel Holdings, the troops stationed there and the naval personnel there still have to travel by boat. If we are to guarantee this type of money to Irish Steel Holdings, I think that the Minister should, with the Minister for Defence, press for facilities for these people to use this bridge. I agree this bridge was built by Irish Steel Holdings without the help of the Department of Defence, but, nevertheless, I believe that the troops or naval personnel serving there should be allowed to use this bridge, the use of which has been denied to them up to now.

The other point I should like to ask the Minister is if he would take steps to ensure that as little scrap iron as possible leaves the country. It is terrible to think that we import goods here and when they become unserviceable they are allowed to go out of the country again when they could be very readily used here as scrap.

Dr. West

I too welcome this Bill. The fact that the money for the present expansion is to be raised from the company's own resources is something we should all be very pleased about.

I should like to ask the Minister if in his reply to this debate he would say something about the company's chances in the increased competition they will have to face in the European Economic Community. The company have shown quite a bit of stability. Certainly, we should all welcome the fact, as the Minister and Senator Russell pointed out, that the employment is to be increased and that the plant is to be modernised. This is tremendously important if we are to remain competitive in this area. But Irish Steel Holdings, in relation to the competition it will meet in the European Economic Community, are very small beer. The plant will be very small relative to the major steel concerns which will be providing competition to it. Therefore, I should like the Minister to say something about the long-term prospects of a firm which have been fairly heavily protected, I think it is correct to say, bearing in mind the fact that the sale of galvanised sheeting has dropped considerably over the last few years. Will Irish Steel Holdings be able to maintain an export market? Will they be able to maintain their position in the Irish market with increased competition and the tariff barriers coming down? I should like the Minister to say something about the long-term prospects of the company.

There is one further point, and on this I should like to support Senator Gallanagh. Seeing that the purpose of this Bill is to increase the Government's guarantee in respect of moneys borrowed by the company from £1 million to £3 million, certainly some arrangement should be made by which the personnel living at Haulbowline should be able to use the new bridge from the island to the mainland. The Army personnel would benefit a great deal from such an arrangement.

I should also like to raise the question of the storage of scrap iron. Scrap iron must be stored somewhere prior to its use in the company's process. I should like to see that the company would not allow the place where the scrap iron is stored to become an eyesore. It is unpleasant to see large quantities of scrap iron which are open to the public view in such pleasant towns as Howth and in the Rushbrooke area. It should be ensured that the storage of large quantities of scrap iron in areas which attract tourists should be done in such a way as not to attract adverse comment.

Finally, I should like to ask the Minister what effect, if any, the proximity of the Verolme dockyard has had on the production of steel? Is there much of a link up between the two firms? Do Irish Steel Holdings produce suitable grades of steel for use in shipbuilding, since the dockyard is less than half a mile away?

I should also like to have some information from the Minister on the amount of steel which is produced for the export market and what are the chances of maintaining that market in the European Economic Community.

Ruairí Brugha

Like other Senators, I should like to welcome this Bill and also to congratulate Irish Steel Holdings. It is not necessary for me to speak other than briefly because the sort of questions that have occurred to me have already been put by other Senators. The modernisation of the plant is a very welcome development in itself and also the prospect that the company may be putting themselves in a position, as the Minister has already suggested, to get into the export market. Naturally, we are all concerned about the future prospects of a company of this nature and I would be interested in hearing the Minister's reply to a number of the queries put by the other Senators.

Mr. O'Higgins

I should like to ask the Minister a small question on this Bill. I noticed in the course of his opening remarks, when he was referring to the fact that the company were embarking on a major expansion, he mentioned that this was following a detailed study of their operations and potential by external consultants whom he named. When the Minister referred to external consultants, in this context, am I right in thinking that he means not only consultants that are external to the company themselves but that they are also external in the sense that they are a non-Irish group of advisers? If the answer to that is that they have not been advised in this connection by Irish consultants I want to know why should that be the case.

I have no doubt that the consultants who were mentioned by the Minister are extremely good and extremely expert in their field. But it would seem that, in the case of a wholly owned State company such as this, if Irish consultants are available they should be consulted before seeking advisers from outside. There may be reasons why this should not be so. Senator West has referred to the type of competition likely to be met with in Common Market conditions, and it may be that some expert knowledge in that particular sphere would be desirable. However, I should like to have some information from the Minister on this point. I should like to make it clear that I am not in any way downgrading the value of advice they have got. As I have said before, I am quite sure that the particular consultants in question are excellent and expert in every way.

Mr. Keery

The remarks just made by Senator O'Higgins have urged me to get to my feet. The point he has made about consultants is something which we hear automatically from many critics of the use of consultancy in this country—why should we have to go outside the country for consultants? On listening to the Minister in this regard, and particularly when Irish Steel Holdings Limited are virtually the only company of this kind, it seems to be obvious that we should have to go outside the country for specialist technical advice for this sort of industry. I would be surprised if we had a consultancy of this kind readily available in this country.

What was of interest to me in listening to the Minister's speech was that the company he referred to as providing the consultancy are, as I understand it, a major steel company in Britain and that some aspects of their operations might conceivably be in competition with Irish Steel Holdings Limited inside the Common Market. Is it not a real problem if an Irish steel firm finds itself turning for consultancy to a firm in a neighbouring country which are in the same business? That is the query that comes to mind and not the patriotically intended query about the origin of the consultants.

I was interested in the questions which other Senators have raised regarding the future of Irish Steel Holdings Limited in the competition likely to emerge on our accession to the European Economic Community. On reading the reference to Irish Steel Holdings Limited and the European Economic Community in the Government's White Paper, I was considerably encouraged to find this point made with regard to the work of Irish Steel Holdings Limited—and I quote from the Government's White Paper Membership of the European Communities at page 93:

Whilst economies of scale are certainly important in relation to steel production, there is growing evidence in both the USA and Europe that the smaller specialised steel plants can more readily adapt their production to take maximum advantage of variations in market conditions than the larger units.

I am taking the opportunity to put that sentence on the official record because it seems to me, looking at the European Economic Community, that this is one of the things that one finds there as one finds in the United States: large operations in any field do not necessarily mean the death of the small firm. This is an important point that our people should have at the back of their minds before they get too great an inferiority complex about the future.

The Minister might enlighten me on this. The Minister's statement says that the principal product of this firm is reinforcing iron. If my memory serves me right, up to a few years ago this firm were not able to produce sufficient reinforcing iron to meet the demand on the home market. Senator West wondered, and rightly so, what amount of iron this firm are exporting. I certainly would be curious to know what is the position. The Minister conveyed in his statement that they are producing enough to supply the home market.

I think they import the iron in ordinary sheet form and it is galvanised dipped in Cork. They produce two or three different grades of iron—26, 24 and 22 gauge. I often wondered why they produced the 26 gauge iron. It is galvanised iron sheet I speak of, a rather light inferior type of iron. It does not take the galvanised dip as well as the heavier gauges. In my opinion, it merely gives an opportunity to those people who would be anxious to criticise an Irish-produced article. I should like to hear the Minister refer to this in his reply.

Minister for Industry and Commerce (Mr. Lalor)

I am pleased that the House unanimously welcomed this Bill. Naturally, questions will arise, but in general the House welcomed the fact, as Senator Russell pointed out, that it is good to see a State-sponsored body being in a position to finance expansion out of their own resources. The debate indicated general agreement with the idea of Irish Steel Holdings, Limited borrowing and going ahead with their expansion programme.

Some Senators may have had doubts about this being a wise decision in view of our expected entry into the EEC. In addition, questions were raised about the advice Irish Steel Holdings received from the external consultants Messrs. Guest, Keen and Nettleford. Senator O'Higgins asked whether "external" meant external to the steel industry or external to the State. The consultants are outside the State, but they are not external to the industry. The board of Irish Steel Holdings examined the consultants' proposals carefully and are satisfied that they are national proposals in view of our expected entry into EEC. As I said, introducing this Stage, the proposals will have the effect of doubling output by improved efficiency.

Senator Russell pointed out that the implementation of the consultants' recommendations would have the effect of reducing unit costs, thereby putting Irish Steel Holdings into a more competitive position.

Reference was made by Senator West to the question of export. Export sales have fluctuated. The latest report and accounts for the year ended 30th June, 1970, indicate that the export sales for 1969-70 were £691,000 as against £656,000 for 1968-69. As against that again, the export sales during 1965-66 were £942,000. This, on the overall, would show that in 1969-70 there was quite a falling-off in export sales by comparison with the figure for 1965-66. Of course, home sales have been progressively increasing. The figure is £4,962,000 for the home market during the last financial year for which we have accounts, 1969-70.

The figures over the past few years for Irish Steel Holdings indicate that they are running their business quite intelligently and satisfactorily. If they can raise this loan and introduce the new arc furnace and the other ancillary improvements, there is no reason why greater benefits will not accrue. I am hopeful that Irish Steel Holdings Limited will go further and achieve even greater things.

Senator West, Senator Brugha and Senator Russell referred to the company's prospects in the EEC. Senator Keery, in reading the extract he did, put on record the appropriate answer to that. Even in the context of a greater Europe, with mass produced steel units, the fact remains that there is room for a small, adaptable and versatile steel mill. This is what is proposed as soon as Irish Steel Holdings Limited have carried out the operation they are proposing to undertake following the borrowing of this money.

Senator Russell raised the question of the sources of raw material. About 75 per cent to 80 per cent of the raw material used by Irish Steel Holdings Limited is scrap iron and steel which is obtainable locally. The balance is obtained by the importation of pig iron which is used with the scrap iron.

I have no information on the viability of the project Senator Russell mentions: the possibility of importing iron ore here and having it smelted. He made the point that it could be imported economically from Australia in huge carriers and smelted here. I have no information on that aspect. I do not know what proportion of the iron ore would be usable. I imagine that the shipping costs of such large quantities might be prohibitive. On the other hand, Senator Russell said he had studied figures and that it could be economic. At the present time there is no proposal to smelt iron ore.

Senator Russell also mentioned the possibility of Irish Steel Holdings Limited merging with some outside steel producer from the point of view of competing in free trade conditions. As I said earlier there is no proposal of that nature being considered at the present time. However, it would be wrong of me to suggest that it is not extremely necessary that this be done from the point of view of protection. There is room for a small versatile steel mill. Irish Steel Holdings Limited, having examined the position in the light of and expected entry into the EEC and into the Coal and Steel Community, are satisfied that they can become an economic unit within that Community following the proposed expansion which they intend to undertake.

Senator Gallanagh and Senator West asked that Army personnel have access to the bridge built by the company. I have no up-to-date information on this. However, since becoming Minister for Industry and Commerce, I inspected a guard of honour of naval personnel there and I did not realise they had to swim across to Irish Steel Holdings. If there is a problem in this regard I assure the House I will have it looked at to see if anything can be done. It would strike me as rather peculiar if Army personnel could not use the bridge and I will certainly have a look at it.

Senator West also spoke about a pile up of scrap iron in the Haulbowline area. Naturally, there must be a build up of scrap around the plant itself. Perhaps I have not got an eye for beauty——

Mr. Gallanagh

What was said was that the scrap was sent by rail to Cobh railway station and was transferred from Cobh railway station to the harbour. It was left lying there until such time as it was required in Haulbowline. That situation may well be rectified now that the scrap is being carried by road.

Mr. West

There were large deposits of scrap opposite the railway station in Cobh, as well as on Cobh island, and they were very unsightly.

Mr. Lalor

I will take a note of that with a view to seeing if any positive steps can be taken.

In relation to Senator Russell's criticism of the title of the company, let me say——

Mr. Russell

It was not exactly a criticism.

Mr. Lalor

He asked why "Holdings" could not be left out. That word has been there for the last 23 or 24 years and nobody has ever questioned it.

Mr. Russell

It was Irish Steel at one time.

Mr. Lalor

There was a changeover at one period and the name was amended. The Senator lives much nearer a firm with a more extraordinary name. I may be criticising some other Minister's Department, but the Dairy Disposal Company has always struck me as a very peculiar name too. Everybody talks about Irish Steel and they do not usually refer to Irish Steel Holdings. I find myself using the former term generally. It is not proposed in this Bill to change the title of the company.

Mr. Russell

That would be the least of their worries.

Mr. Lalor

If there was an amendment in the Bill covering the title of the company the Minister would probably introduce it by saying it was a tidying-up operation. I have not proposed that kind of tidying-up at this stage mainly because I look upon the word "Holdings" as rather appropriate. The exercise is to try to hold on to this industry.

Mr. Russell

That would apply to a number of companies.

Mr. Lalor

I am satisfied, in consultation with Irish Steel, that the prospects, following this re-adjustment and improvement, in EEC conditions should be quite satisfactory.

Mr. Russell

I referred to companies supplying the home market with certain types of drawn wire, companies such as Irish Wire Products. If Irish Steel are not going to do business with such companies, it means that the factories concerned will continue to import their raw materials. Is that correct?

Mr. Lalor

That would be correct. I know that Irish Steel do not, at present, produce this type of wire.

I think Senator West raised the point that Irish Steel do not produce suitable steel for the shipbuilding industry across the harbour. Irish Steel have not the capacity to produce steel cord for radial tyres, which was also referred to. Up to now there had not been a market for this, but the development of this industry in the Limerick area opens a side of the business that Irish Steel would be interested in. Any Minister for Industry and Commerce coming to the Seanad seeking a broadening of credit facilities for a project of this nature would be welcomed. I know that, if I found it necessary to come back to the House seeking a further expansion in guaranteed credit facilities to put Irish Steel Holdings in the position to produce the radial wire for those tyres, the House would be in agreement.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and passed.

Bill to be sent to Dáil.