Cynulliad Cenedlaethol Cymru

Good morning, everyone, and welcome to the Economy, Trade and Rural Affairs Committee's final meeting of the sixth Senedd term. We'll be taking evidence on the steel industry here in Wales, and we have three panel sessions for this morning's committee meeting.

Before I ask the witnesses to introduce themselves, I will just do the usual housekeeping rules, if I may. I'll call for apologies. We have an apology from Alun Davies, who will be joining us later in the meeting. I can see all other Members are present. I'll call for declarations of interest. Luke.

I'm a member of the transition board.

Okay, great. Thank you. I don't see any other declarations of interest. The meeting is fully bilingual and for those who require the translation facility, the headsets provide that. The microphones are fully automated, so there's no need to press the buttons on the microphones, and it is being broadcast on Senedd.tv, and there's full translation on Senedd.tv.

I'll ask you, gentlemen, to introduce yourselves, if I may. You represent, obviously, the unions at Port Talbot steelworks, but, for the record, if you could state your name and position at the steelworks, that would be most helpful, and then we'll go straight into questions. Barrie, you first?

Barrie Evans, Community union, and I'm multi-union chair for Port Talbot steelworks.

Ian Williams, convener, Unite the Union.

Thank you, gentlemen. Trade measures were announced last week by the UK Government. Obviously, these measures needed to be announced before 1 April. Is your understanding of these measures that they will provide sufficient protection for the steel industry, and in particular the steel industry here in Wales, to allow you to thrive in the future?

I'm going to go first on that. So, obviously, it's a significant milestone in our steel industry. Hopefully, it will stabilise our industry—we haven't had any stability, probably, for a number of decades. I do think this is just work in progress, it's the beginning, but it does give a bit of reassurance, I think, to all the companies in the UK, and especially in Wales, that we can support our own industry. And hopefully, it will give us a fighting chance on a level playing field, which is what we've been asking for for a number of years.

Like I said, it is early days. We've seen decades of, probably, cheap imported steel being dumped onto our shores. Hopefully, now, with a little bit of protection, this will give us a fighting chance, and hopefully we can build our steel industry to make sure we're using British steel in the UK for defence and all the other products we make. So, hopefully, this is the beginning of putting our steel industry back where it needs to be for the future.

Just before I ask you to answer that question, Ian—Barrie, you say it's the beginning. What more do you think needs to be done, then, if we're only at the beginning? Or do you see this suite of measures having to prove itself, first of all, before additional measures are added, if indeed they are required? 

I don't think it's a silver bullet yet. I think there's a lot of work to be done: negotiations between trade unions, Welsh Government, UK Government and the companies. I think we need to see a road map by the companies on future investment that's fit for purpose for the future, things like there's going to be a green steel industry, plate mills, wind turbines—the new technologies that are coming forward. That's where we'd like to sit down and all work around the table together, and hopefully we can come up with a plan, a long-term plan, that's fit and sustainable to make our company profitable.

Like I said, it is only the beginning. They really, really are bold measures, I think, in fairness: 50 per cent home market, which is really positive; 60 per cent on imports coming in, which has gone above and beyond what we probably expected. So, there's a lot more to do. And like I said, hopefully working groups can be set up now to progress and finalise some of the detail in the quotas and tariffs. But hopefully we're on the right path, and it's the beginning of making our industry great again.

Thank you. Ian.

I think, on the position of Unite, obviously, the UK Government trade measures, they're welcome, but they're long overdue. We've gone a long time without having any measures in place. But I think they can only be a partial solution. We need to see the fundamental changes and some of the structural issues that we've got with energy, with skills and other parts. So, they don't take effect immediately, so it's going to take a period of time to see how these measures truly affect our industry. But they're only a start. As I say, we need onward investment. We need changes to procurement. The steel strategy, I think, is a work in progress that we've really got to push now to make sure that there is a viable industry. 

But I think, on the trade measures, there are two where, initially, from what we can see, we have got some concerns on. One is hot-rolled galvanised steel, and the other one would be the hollow section. So, with the hot-rolled galv, I know the proposal is to increase what Asian companies have through that quota. So, the proposal, I think, going forward, is approximately 174,000 tonnes allocation to Vietnam, and 100,000 tonnes to South Korea. That's roughly 275,000 tonnes. The current quota for each of them is 50,938 tonnes, so there's a difference of 173,000 tonnes. But, obviously, the Asian countries can bring into the UK, so that is a concern for us, and I think that's a concern for the Llanwern site as well. But the devil is in the detail, and I think we'd welcome some conversations around that.

The other ones are the hollow sections. Now, the quota has decreased by approximately 50 per cent, but we have seen Turkey be a major supplier into the country with that. Their price is approximately 20 per cent lower, which is something we can't obviously keep up with. That's initially a Corby and Hartlepool issue. Going forward, if we are going to be the supplier to Corby and Hartlepool, it's obviously an issue that affects them, it's an issue that affects Port Talbot. 

So, I think, fundamentally, the quotas are positive, and, in a lot of cases, they're a lot better than what we asked for. But I think, on those two, we would welcome any conversations with UK Government, with Welsh Government, and working together to try and improve them to ensure a longer term viability for our steel plants in Wales.

And what sense can you give the committee of the level of engagement you as unions have had in the discussions with the UK Government to reach this position? You highlighted there, Ian, that, obviously, this tariff rate is higher than you asked for. So, I presume it's an ongoing conversation. Are you confident that's an ongoing conversation, or is it the case that this is it and that's what you've got to work to?

I think, initially, it feels like the UK Government are supportive of looking at the measures. But I suppose the devil is in the detail of that, and we need to work from—. Obviously, with these coming out over the last week, we now need to work with the UK Government to see where we are and where we can move on. I suppose one thing I would say is, they're going to be reviewed yearly going forward, which is obviously a positive. And if there's something that we don't feel is quite right now, there's obviously that review period in a year's time where, potentially, we can change things as well. So, yes, I think, the conversation has got to happen over the next couple of weeks to understand where it's possible to perhaps change them slightly to make them better for the Welsh steel industry.

Barrie, have you got anything to add?

I think that's absolutely right. I think this is just the beginning. Obviously, there have been a lot of—. I've lost count of how many business Secretaries have been to Port Talbot over a number of years. We've all had warm words off them many, many times. Finally, it looks like the Welsh Government and the UK Government are working with the trade unions and understand the need for a UK steel industry. 

We've obviously got a lot more work to do on procurement, scrap prices, electricity prices. There's lots, lots more—future employment skills is a big issue. I think one of the—. The carbon border adjustment mechanism is a massive concern for us, so I think it's really important now, when we set up working groups with all stakeholders, and we all sit around the table, and come up—. Like I said, this is great work to start, a starting point, but we've really got to push forward now to make sure we get some of these other things over the line, like a free open market into the EU. We do export our stuff—about 80 per cent of our material goes into the EU. We haven't got a single market for that at the minute, so that's a big concern for us. On CBAM, energy—we all need to sit down together, set working groups up, and hopefully get to the right place, so that it's sustainable for the long-term future, then. 

Okay. Hannah. 

Diolch, Chair. The UK steel strategy was finally published on, I think, 19 March. I just wonder if either of you have any initial reflections on that; I've heard the responses from the trade unions to it. Do you think it will meet the scale of the challenges facing the industry, and what kind of tangible impacts do you think it will have? It's one thing to have a strategy, but it's what it does in practice. So, what do you think the impact will be, or what do you want it to be?

I think, in fairness, we've been calling for a strategy, an industrial strategy, for a number of years. I think what's happened in the last year or so has been—. I didn't think I'd ever see this amount of work get done in the last year, with everything. Good luck to Scunthorpe—they've survived. Speciality Steel UK—the Government have stepped in and taken them over. We've delivered an industrial strategy. We've delivered a steel strategy now. Obviously, we've had a supercharger on electricity prices—90 per cent on market charges. That's probably saving the UK industry about £14.5 million a year at the minute, just a supercharger. So, I think all of this coming together is a big step forward for our industry. But like I said, it's still early days, we've got a lot more work to do, but it's the beginning of putting us back, building our industry where it needs to be for the future.

For me, it's clearly a step forward in an intent to support the industry, but not yet in the delivery of it. What we would like to see is more definition in there. We need measurable targets with defined timescales on them, and that is lacking from the strategy at the moment. I think, obviously, the target of 50 per cent is a welcome starting point, but we want ambitions to be stronger than that. We know that green steel is set to grow exponentially throughout the world, and why can't we be the leader in that? So, I think, as a good starting point, 50 per cent is welcome, but we need timescales of how we can get that to 60 per cent or 70 per cent and truly be a leader in how green steel is set to grow.

Without solving the structural issues, again—I know we're harping on about them—we need steel to be classed as a critical infrastructure. That will allow us to procure steel made in the UK for all UK projects. We need the industrial strategy to truly link into the steel strategy, because one doesn't work without the other. We need proper controls on scrap. That's going to be our new raw material, going forward, and I welcome that meetings are going to be set up, but I think that needs to happen very quickly and we need to come to a solution. Because where the electric arc is going to come on in 2027-28, we're going to need to source scrap a lot earlier than that, and our scrap industries in the UK and across the world know that we need that scrap, so you can see that prices are going to go up. They're not dull, they're planning for this now, so we need those proper things in.

And I think a big thing we need is the regional guarantee. We've called a lot for Wales to be ring-fenced an amount of money out of the steel fund, and that really needs to happen, but that's got to be product-specific investment, so that we know Port Talbot is going to be the leader in X, Trostre is going to be the leader in Y, and we really need that to be ring-fenced. That's one of the conversations we need to have, going forward, about that ring fence. And we would've liked to have seen, probably, more detail in the strategy around that sort of stuff. Because we can't be in a position where, you know, Port Talbot paid the ultimate price, it lost its heavier end, it's losing 2,800 direct jobs, but take the communities and families outside of that, and contractors—. We can't be in a position where we're having to compete for the support afterwards.

I think the plan for direct reduced iron, really—. We know that DRI is a thing of the future that we've got to have to make a sustainable steel industry in the UK. I would've liked to have seen timescales on when we're going to put DRI into the UK to make sure that that supports all the UK steel industries. I think offshore wind is a massive opportunity. I do genuinely believe that wind turbines are a massive opportunity in Wales. We see the announcements for north Wales, and I know, in the steel strategy, steel companies can, under the clean industry bonus, apply for help with steel from the UK. The issue we've got is that there's not significant capacity at the moment in the UK to be able to supply their market. So, I think plate mills, shredders, DRI, investments in our coal mill are things we desperately need, and, ultimately, we need the company to come forward, but if the company won’t come forward, we need a Government that's going to push to make sure that they are in the UK anyhow, and have the mechanisms to do that. But if Tata doesn't want to invest in those things, we've got to do what's right for Wales and the UK. So, yes, there are a lot of positives in there, but we still need a lot more detail and we still need to work into it.

I think one thing that Wales has got is the Celtic Freeport, obviously—that's onside for us. We've got a massive opportunity for that to be an industrial haven. We've got to make sure that that's not a logistics haven with poor, low-paid jobs, it's got to be industrial. We've got to bring businesses and industry back to Wales.

Thank you for that. I think you've almost answered my second question, anyway, so I'll skip that. But I think you touched on the ring-fencing of the funding. I know trade unions have called for that before, and I saw there was an article just this week on a potential plan from the UK Government to give £2 billion to British Steel. And I don't know—. You mentioned the free port too, Ian. What discussions have the unions had with UK and Welsh Governments to try and get that parity of investment that we want to see in Wales?

I think, like I said, it's a direction of travel, but we are concerned, obviously, in Wales. Good luck to everybody in Scunthorpe, it was the right thing to do, but I think we need to make sure that money is ring-fenced. Like Ian alluded to, the DRI is in the strategy as a long-term objective. In our view, that should be expedited, and it should be a short-term objective. We should be looking to make primary steel in the UK as quickly as we can. The Scunthorpe furnaces are still going, but I think primary steel making should be our objective and that DRI plant should be a short-term objective. That's what I think we need to get down.

The Hatch report justifies a DRI plant in the UK to supply all electric arc furnaces in the UK, going forward, but I really think we need to be sat in a room, in working groups and pushing for future investment. Where is the road map? What do we see our future order book looking like? We've got a 3 million tonne electric arc coming on; I don't know if we've got an order book for 3 million tonnes at the minute, so we need to make sure we work together to get that order book right. But DRI, plate mill, electrical steel—I'd like to see more detail on a road map with the companies all on board as well. That's important.

Yes, I think the same. As Barrie said, it's about the investment going forward, and, look, I don't want to pit us against British Steel. What the Government did for them was the right thing to do. It should never have been allowed to run as it was. What we've seen is this drive from companies destroying our industry, really, and being allowed by Governments to destroy our industry in the UK. I think we do need some support, but also a stake, really, from the UK Government. If we truly believe steel is a foundational industry, they need to take a part in that. DRI, not only for Tata, but, obviously, you've got 7 Steel, is good for Wales. We've got the land for it. We should have those things. I think any money that's given to Scunthorpe should be outside the £2.5 billion that's available for investment throughout the UK. So, I think—

So, it shouldn't take away from that. It should be distinct—

No, it's not about competing with everybody. What I'd like to see is, with the strategy, that each company has got their specific areas that they invest in so we're not in competition in the UK, actually, we're supporting each other.

It's almost like it's mapped out, so you can see—

Yes.

Great. Just one final question from me, Chair, because I know we've only got a short session this morning. We know electricity prices are a huge issue. The strategy touches on that, but, like you said, there are no clear measures in it. What further action do you think is needed from the UK Government to tackle that issue?

I think there are a lot of long-term aims to make electricity or energy prices in the UK similar to other countries, but, certainly in the short term, that is going to be one of the biggest costs for us and for other countries. So, I think we desperately need to bring the wholesale costs down, which would, obviously, help, but we need a level playing field, so we need more action in the short term. Whilst the long-term or medium-term plans come in, we need more in the short term to align us with France, Germany, because we're still £20, £30 a kilowatt away—sorry, a tonne away—from them.

And just very finally, sorry—. So, a lot of the things, a lot of the intervention, we're talking about need to be done at a UK level, but are there any things that you think the Welsh Government or a future Welsh Government should be doing in the areas where they're responsible to support the steel strategy and make sure that it actually delivers something in practice?

Like I said, it's really important that Welsh Government buys into it as well and we all work together. I think there's so much that Welsh Government can do, obviously around procurement, making sure we're signing up to a steel charter. All local councils in Wales should be signing up to a steel charter. The first port of call should be UK and Welsh steel, to use that. Obviously, we don't make all the products, but any products we do make in Wales should go into Welsh projects. So, we really need that.

Obviously, planning permission on the energy infrastructure. We're a long, long way behind where we need to be as a country. I think it'd be nice to see tidal lagoons and things, and small nuclear reactors, like other countries are going down. So, I think there’s a lot of work we can do together, and Welsh Government can support us on that, and the Welsh Government can support on future employment skills. We are an ageing workforce, so I think it’s really important that we do work together to have a plan for how we train people up to be—. There are highly skilled jobs in the steel industry. It’s really important we work together to make sure we’ve got the right skills in Wales.

Yes, I think the biggest thing is to continue with the open dialogue we’ve had with this Senedd and previous ones. I've got to be honest, it's a breath of fresh air. I think the whole Senedd understands what the steel industry is and I hope the next Senedd coming in are as supportive as you’ve been. But I think we need a real Welsh steel and industrial strategy as well. We should have a strategy to cover steel and industry for Wales. We do need investment in skills, and that's through apprenticeships and the like, because we’ve got a massive issue with skilled people in the UK. So, if we can invest in that, I think naturally we will get industry to come here. We need community regeneration as well, and I think the Celtic Freeport, if we can make that an industrial free port, we'll solve some of the issues we are seeing around the Port Talbot area as well.

Okay. Just before I ask Jenny to come in on her questions, could you confirm for the committee that it is your understanding that that £2.5 billion steel fund, whilst welcome, is paying for the costs at Scunthorpe?

So, my understanding of it is that £2.5 billion is available. The money going into Scunthorpe is a loan. But the issue personally I’ve got with that is, obviously, if you’ve only got £200 to spend, if I loan you £100, I’ve only got £100 I can spend on something else until that investment comes back. So, I don’t think it’s fully clear, but we have got meetings set up with Chris McDonald who is going to come and run through a lot more of that with us.

It’s a massive concern for us. Like I said, we challenged the Ministers last week who attended Port Talbot to deliver the steel strategy. It’s a huge concern for us. Chris McDonald has committed to sit down with us and explain the mechanism around there. Our view is that that £2.5 billion should be for future investment, not propping up losses in Scunthorpe and other places, so we need to be all on the same page on that.

Just for clarity, it’s your understanding that that’s been done on a loan basis at the moment, but it could obviously be written off and taken out of that fund. Jenny.

Tata are claiming that the electric arc furnace is going to be online by 2027. Do you think they’re going to make that?

Obviously, there are massive challenges. Any project in the UK, unfortunately, seems to drop behind on time and budget. Obviously, the grid connection is a major issue at the minute—the national grid connection, the electricity supply into that. We’ve been told, I think in the last committee meeting, that there was a couple of weeks' delay. It’s probably looking like a few months now, unfortunately. But it just shows—. The world is very volatile out there. We’ve got a lot of material being made all around the world for the electric arc furnace. Even in the last fortnight now, the electric arc shell is sitting in China and the shipping costs have substantially gone up. So, there’s a cost issue on it and the timing issue as well, so there’s a massive concern.

It’s not just the electric arc. Obviously, the project is £1.25 billion. So, there are four main projects. You’ve got the new pickle line. The pickle line is on budget and on time. You’ve got a hot mill upgrade of coil box and crop shears, so all that’s progressing on time and on budget. You’ve got a casters upgrade; that’s going okay. The big stumbling block at the minute, obviously, is around the electric arc furnace, predominantly around the national grid. So, any help the Welsh Government can help us with to put some pressure on the National Grid to pull that back would be very welcome and we’d appreciate that.

But our aim—. I think we should be looking for probably early—. And it’ll be interesting to see how the company respond to that question, but I think probably it’s looking mid 2028 at the minute, and obviously that’s difficult. The transition obviously is not what we wanted. But, obviously, we are bringing in Indian slab. Obviously, like I said about the shipping delays, we’ve had bad weather, so we’ve had ships delayed because of that. Shipping costs are going up. So, the longer the transition, the more doubt about keeping the hot mill and other things operational. So, it is a worry, but, hopefully, we can get it back on track. 

All right. But, clearly, what we’re trying to do is become less dependent on external factors and have our own steel production.

Absolutely. 

So, let's just agree that we live in a very unstable world. Ian, you said earlier that the scrap metal industry was likely to increase the price of scrap metal, because they know we need it. Could you explain why? Because 80 per cent of scrap is exported at the moment and surely it's much nicer to be dealing with a customer in this country—less aggravation around all of the other trading issues we've just mentioned.

I think our concern is that, obviously, without proper controls around the industry, there's nothing stopping it from being sold to the highest bidder, is there? And if that highest bidder is outside of the UK, then there's nothing to keep it in the UK. If we want a truly circular economy, we need to ensure that we can keep what we need to run our industries in the UK. Businesses know that we're going to have to now take a lot of scrap metal in to run a 3.2 million tonne plant, and that's a new market. My worry, obviously, is that, if we haven't got those controls in there, what's stopping industries from pumping up prices or, if the price is higher outside the UK, why wouldn't you sell it outside the UK, and then we're at, obviously, a loss in terms of our supply.

Okay. So, is this something where, the UK Government, you're hoping they'll put controls on the amount that could be exported?

Yes. Yes, we're hoping that—. Obviously, through their strategy, they've announced that they will start talking to the companies about what they need as a scrap policy. Our hope is that that policy will stop some from going out of the UK. But I think the other part is that we need to ensure that we've got the quality scrap as well, and that's why things like a shredder would be perfect, because we can take scrap, shred it ourselves and make it into the viable product we need. 

Can I just ask Luke to ask a supplementary?

Thanks, Chair. I'm just wondering—. In some of the conversations I've had with scrap merchants, one of the things they've raised with me quite a bit is the payment terms in particular. Do you think that's potentially going to have an impact on sourcing scrap? Because the way it was described to me was that, when they export it, essentially, the minute it's on that ship they get paid. Whereas if they want to go to Tata or 7 Steel or whoever, then they're waiting 60, 90 days plus to get paid. And maybe it's unfair for me to ask that question to you guys, but do you think that's going to be a factor around sourcing? 

I think it's a massive concern. We've seen that, obviously, the company has been struggling for a number of months now, and we are having issues about payments. One of our huge concerns is our scrap procurement. But I really think that conversations need to start ASAP with scrap merchants, with the company, with trade unions, with Government, and we get all of these things nailed down as quickly as possible, because the longer it goes on, the worse it's going to get. So, I really think we need to—. There's enough scrap in the UK, obviously. Good-quality scrap is what we want, because the better you put in, the better quality you'll get out of the electric arc. But I really think that these working groups now really need to progress and start sitting down around the table and ironing some of these issues out for the long-term future. 

Yes. I think if you spoke to a lot of our contractors, those who work for our suppliers, Tata is not known for being 100 per cent the best payer and on time, but if that's the industry norm, to be paid as soon as it's purchased, obviously that's something that Tata has got to go towards. And if there's an issue with that, then really we need—. That strategy needs to have both sides of that in it so that it works for the supplier and it works for the customer, obviously.

Jenny.

There are lots of moving parts here, but is there anything else that you think Tata should be doing to ensure that the investment in the EAF is going to enable production to hit the ground running as soon as it's completed?

Yes, I think that we need a commitment from Tata. I think that it's good, what we've seen with the electric arc and what is happening, but we're an aged plant, so we've got to make sure that Tata puts the investment in to make sure that our mills and our downstreams are capable of taking the full amount of the electric arc. I think one of the worries that we've got is that there's not that much investment or development of the downstream operations. Clearly, we've got to look at what the demand for steel is going to be in 10, 15 years' time. If we want a proper, viable future, we shouldn't be looking at what our market is now; we should be looking at what the green market will be in 10, 15 years' time. But I don't think we're seeing the investment from Tata in the downstreams for that to be successful.

Okay.

Hopefully—. Like I said, the chairman of the group came over last year. That was a massive sign that the Tata group is committed to this project. I think there's a number of high-profile visits coming again in the next few months. So, I think the commitment is there off the Tata group. The chairman flew over himself. That's a big commitment. There are probably five or six massive projects in the group, Port Talbot being one of them. But, like I said, the concerns are there. We're probably going to have to have extra funding to the project and, probably, timeline, but I think we've all got to work together to get this over the line. It's in everyone's best interest that we get this up and running as quickly as possible.

Okay. Ian, you also mentioned the skills needed and that you thought were lacking at the moment. Over £100 million was provided for the transition board. Why was that not targeting those skills that you think were needed?

I think there are two issues. Obviously, what we're seeing—. Through the redundancy programme, we didn't see a lot of our craftspeople leave. The ones that did have migrated, probably, to Hinkley Point and better paid jobs elsewhere. But that transition money was solely for people who left the business, not for people who, obviously, were retained in the business. Now, one of the things we've got is we had approximately 2,200 job losses, with a planned 2,800. So, we've got another 600 jobs to go by the time the electric arc comes online. At the moment, they cannot access that transition fund money. So, I think what we need is that transition money to be used to upskill people who are currently employed, that will allow them not to have compulsory redundancy or give them the skills to leave the area or leave the works.

Okay. I think Luke's got further questions on this.

Okay. Jenny, have you finished your set of questions?

Yes, I've finished.

Okay, just one thing before I ask Luke to come in on it. Barrie, you said you had concerns about paying, and I presume you're referring to Tata Steel. Is that a recent issue around payment of bills, so that would indicate an issue around cash flow, or is it something that the company is known for within the sector?

I think it's been resolved now. Probably a year ago, we were struggling to pay. Obviously, our cash flow was in a very poor situation. Hopefully, with all of this—. Most of that cash flow was around the quotas and tariffs, so, hopefully, with this strategy, with the quotas and tariffs in place, there could be a huge swing, to break even at least. That's where we need to get. Obviously, our cash flow—. There was no money in the business. I think it's fair to say there was an injection from our parent in India to start paying contractors and things like that. So, it's been a very challenging time. But we've resolved those issues now and, hopefully, we can move forward. And, like I said, with the right platform, things can settle down, we can break even and, hopefully, we can all move forward in the right direction and keep paying people and keep supplying steel from Port Talbot.

That's a helpful clarification. Thank you. Luke.

Diolch, Cadeirydd. First, I just want to thank you guys for your engagement over the years. It's been really helpful, I think, to the committee, and to me personally as well, in trying to get to grips with some of the challenges within the industry—long-standing challenges and some of them more recent challenges.

But I just want to pick up on the skills element here, because I'm looking at the steel strategy, and the one thing I was hoping to see was that road map that we've touched on. When we talk about skills as being one of the primary challenges, going forward, well, that road map, I think, would have given some certainty around where we need to focus our investment in skills. And you look at the situation, which you've already touched on, with people leaving Port Talbot to go to Hinkley Point, and people struggling to get those well-paid jobs, which, ultimately, is probably going to mean that they're also going to migrate out of Port Talbot as well. We're in a real, potentially, crisis situation where the electric arc comes online, we finally get that road map with different things being set out, but we simply won't have the people there to do the jobs. So, what I'm trying to get today from you guys specifically is how you feel the situation is developing now with the steel strategy. Is there a feeling at least amongst people who are in Port Talbot, within the steel industry, that there is hope, and that gives them that encouragement to at least stay in the area for the time being until something more concrete comes along? I know that's very difficult to ask of people, but we have to try and work something out.

We've had very little positive news; it's mainly been negative news in the last, probably, 15, 20, 30 years in Port Talbot, and all the UK steel industry. This is the first bit of positive news we've had for a long, long time. Hopefully, it's a platform, but I really think, working with the Welsh Government, we can start developing an employment skills plan. I think it's really important. Craft—obviously, we could start utilising apprenticeships, but it shouldn't just be craft, as you can have a manufacturing apprenticeship, you can have a technical apprenticeship, and there's a metallurgist. We should be investing now in the future. This should be a green tech business, going forward, not a dirty old steel industry. This should be a green tech industry, and we've got to start upskilling people and keeping people in the area, and giving youngsters in school an opportunity to come into this industry. So, that's what we want to work together on, to try and get this plan in place.

I think, on apprenticeships, we've got issues with the apprentice levy and a number of other things. But I think, with the steel strategy, if we'd had more of that definition where we knew certain things would come to Port Talbot, would come to Trostre, then other businesses around know, if you're going to have the supply there, you might have the customer coming there. But I think skills is a massive issue, and my worry at the moment is, yes, we've got a lot of people who have gone to Hinkley Point, but come two years' time, when Hinkley Point is finished, or three years' time, they'll come back. There are a lot of people who have gone into other jobs but not at the rates of pay that we've got now. They're using their redundancies and their savings now to bridge that gap, but come a year or two years down the line, if we're not careful, the transition board will have finished and will have said, 'We've done a good job', and the massive hit comes in two years' time.

Just touching on some of the work of that transition board, then, and more generally the transition within Port Talbot itself—I will, of course, just reiterate that I sit on the transition board as well—do you think enough is being done around addressing some of those challenges when it comes to the workforce and the wider community in Port Talbot to help with that transition?

Obviously, £122 million in total went into the transition fund. I think, as a perfect example, the community hub in Port Talbot has worked very well. It's something probably we can all use in the future and learn from that. Some disappointments from us—I think, obviously, we seem to all forget about contracting partners. Now, a lot of them, they've gone to the transition fund. Sometimes, you've got to put your own money upfront. Some Tata people have had redundancy and they've had the money available. Our contracting partners haven't had that money. So, they've had to go and migrate out of the area.

I think one disappointing thing—. It would have been nice to have a tracker. So, the people who come out of the steel industry, we could have tracked them. I know a lot of them were happy, with GDPR, to give their details, and there was no problem. It's disappointing we didn't have a tracker so that we could have tracked what work they've gone to, what wages they've gone into and things like that. So, that's one thing, and I don't think there was enough engagement on the transition board with local reps at the time. So, I think one thing we can learn, going forward, is that local reps in the area should have been involved on the transition board from day one.

Like I said, £122 million has supported—. We haven't seen a spike in unemployment yet in Port Talbot, but I think it could have been handled, and a tracker would have been really beneficial so that we knew what people were earning and what jobs they've gone to, and to bring them back in the future. Like I said, you're going to have molten iron and it's not something you can just turn up and work with, that sort of material. It's highly skilled, with a lot of training, and it would have been ideal to bring people back for that time.

So, just to be clear, then, in terms of your engagement with the transition board, even after your last appearance in front of the committee, where the committee made a point of calling on the transition board to engage with you guys, you still haven't had any sort of engagement.

No. The local reps have had no engagement with that board.

Yes. Disappointing.

Yes, and I think the transition board needs to look at the long term, with the jobs that we know are going to be made redundant in the next two or three years. We want to try and mitigate those jobs, obviously, and if we can have a proper industrial steel strategy that brings jobs, we can migrate people from one job to another. But we've got to keep an eye on them and make sure—. I think the money should be unlocked for them to start training today, so that they're ahead of the game in two years' time when, in the worst case, they are made redundant, but they've got the skills to move into other industries.

And just one final question from me, Chair. It's more about the aftermath of this—and you touched on it, Barrie—around things that we can learn from this session, or from this experience in Port Talbot. Have the unions had any sort of engagement or conversations around doing some sort of assessment of how things went? I mean, if you look at where things are heading—decarbonisation of industry—there are going to be other situations where there are mass job losses within certain industries. I think, as difficult as it has been for Port Talbot, there was an opportunity for us to get at least an idea about how a just transition would work. And having that sort of post-assessment of what happened, I think, would be really useful. So, have any conversations happened?

No. I think it's something we could take forward. And I do agree with you that we've made the mistakes, but let's hope we can learn from them for other areas around the UK. But I think, in general, when we were, obviously, going through the—. We put a different plan in and we genuinely believed that was the better plan. I think the company didn't want to really engage fully with that. I think there was a lot more that the Government, the company and probably the unions together, aligned, could have done to make it a better transition, but, yes, I agree with your point—we've got to make sure that we don't make the same mistakes again.

I think there's a lot of learning that can be taken away from it. We have had numerous meetings with the Secretary of State and raised our concerns there. Like I said, I think it's a learning. The answers are there. There's no spike in unemployment at the minute, but we're still nervous about that, and what jobs people have gone into and the long-term sustainability of those jobs. So, I think we've all got to sit down and carry on working together to make sure that people learn. Like you said, this won't be the end. There are a lot of other industries struggling at the minute. So, I think we've all got to learn from what happened in Port Talbot, going forward.

Yes. Great. Diolch yn fawr.

Sam.

Thank you very much, Chair. And thank you, both, for your attendance today and for your engagement with the committee over the years. I commend the Chair and the previous Chair for the work that this committee's done on the steel sector. I think it's been one of the strongest suits of this committee over the Senedd term, the sixth Senedd term, given everything that has happened at Tata specifically.

Looking forward, we'll, obviously, get a new Welsh Government in a few weeks' time. For that Welsh Government and for this successor committee, what would be the priorities you think it needs to be looking at in terms of support for the steel sector? There's been touching on the skills audit element of it, but what would you say that the new Welsh Government, on coming in, on day 1 to day 5, needs to go, 'This is what we're doing'? Barrie.

For me, like I said, I think we've touched on a lot of it. Again, I'd like to thank this committee. You've been very supportive and I really appreciate your time and what you've done for our industry and the support. So, thank you for that as well. But I think the three main asks for our steel industry and the Welsh economy are—. We've touched on developing an employment skills plan. It's really, really important because, like I said, it is an ageing workforce. So, I think we really need to sit down and work together as quickly as possible when the new Government is in and develop a skills plan. Secondly, I think the ask would be of whoever is the Welsh Government to work with the Secretary of State to access some of the national wealth fund. Obviously, the national wealth fund is there and we should be looking to invest that in Welsh steel projects. So, that would be another ask—the national wealth fund. Hopefully, we can all utilise and get money out of that fund. And then, obviously—I touched on it earlier—there's procurement. I'd like to see the new Welsh Government mandating that all local councils use Welsh steel first. Obviously, not all products are made in Wales, but whatever products are made in Wales, any large project should be using Welsh steel. So, those would be my three asks of the new Welsh Government, please.

Lovely. Thank you, Barrie. Ian.

I think the first one would be to continue the open dialogue you've had with us, and I think that's vitally important all the way through. I'd like to see a real Welsh steel and industrial strategy, and I think that is vitally important. Skills—again, if we bring the skills here, I genuinely believe that we will attract industry here. And I think the free port, and making that a proper industrial free port, can mitigate a lot of the issues Port Talbot has seen, but it'll help the whole of Wales. So, I think those would be my top three asks.

Okay. Thank you. And I think that's a good place to end it, so, thank you, both. Thank you, Chair.

Jenny.

I was just wondering and was going to ask you about this earlier, which is that the UK steel safeguards, covering 14 products, is due to end in June. It can't be extended because of the World Trade Organization rules. So, what are you going to be asking the UK to do as a result of this? How significant is it for the strategy you're endeavouring to develop around Port Talbot?

Well, obviously, the tariffs will come in on 1 July, and I think they'll do a lot of the protection that those industries do.

But I think, as a last from me, I would like to thank this committee. You've always been very supportive of us. When, a month ago, it didn't look like we were going to have any changes to tariffs or a steel strategy going out, we reached out to all of you, and I commend you all for coming and speaking to us and agreeing to have a session on the last day of committee session. So, I really, really thank you all for your support. I hope we've got the same people around this room going forward that know and understand and have fought for the steel industry. So, I'd like to thank you all, and it is recognised how hard you've worked to support us. Thank you.

Thank you. Just one final point from me, if I may, before we go into our commercial break and swap the chairs around: I still can't work out—and this is most probably my simple mind, simple farmer's mind—why you guys, as the local reps, weren't on the transition board. It doesn't make an atom of sense not to have that local knowledge. I know we've put that question to you before, but are you able to give us any light as to why, in effect, you were barred from getting on there?

We've asked many times, and, perhaps, if we're honest, we should have barged the door down. I may as well be honest: perhaps we should have rocked up at one of them, and said, 'We're coming in through the door.' So, I think that's something we, obviously, can learn from. But I think we've asked many a time. I think the different aspect we give is the aspect of the people on the shop floor. We are hearing things that will not necessarily come through a feedback form, will not necessarily come through other people. So, I think a massive learning going forward is that, and, hopefully, with the—. I hope the transition committee continues. I've got to say: I'm there tomorrow, but I'm there as representing our national officer. As it goes forward, I think that's desperately something we need because, yes, it gives an insider perspective.

It's massively frustrating for us. Like I say, we are boots on the ground, we are fronting up to all of these workforce, on a daily basis, and we are getting the difficult conversations. No disrespect to the national officers, but I think we could have offered something different to that transition board, and my predecessors before me as well could have offered something different to that. It was just boots on the ground. We were hearing real stories, what was happening to people, and we could have been a benefit to that transition board, I believe.

Okay. Thank you, gentlemen. I agree entirely with the sentiment you've just both expressed. The transcript will be sent to you to have a look at. That will form the official record of today's proceedings. If you have any concerns or observations around that transcript, please liaise with the clerking team. But, as I said, otherwise that will stand as the record of your evidence to the committee today. We'll now go into private session while, as I said, we change the chairs around and invite our next guests in. Thank you.

Thank you very much.

Thank you very much for your support. Thank you, everyone.

Good morning and welcome back to the second evidence session that we have. We have 7 Steel in with us today, representatives of that company, to add to our knowledge of the steel sector and the announcement that was made last week by the UK Government. I'll ask the two witnesses to introduce themselves and their positions within the company for the record, please. If I start with you, Laura, first, and then ask Ceri to say his position as well.

I'm Laura Thomas, I'm the commercial director at 7 Steel here in Cardiff, producing with an EAF.

Hi, everyone. I'm Ceri Davies, I lead on policy and public affairs for 7 Steel.

Okay, thank you. What is your view of the trade defence measures that were announced last week in respect of the UK steel sector?

We welcome them, and 7 steel has been working closely with UK Steel and Government to continue lobbying for more of a balance within the steel industry. The trade measures are bold and ambitious and will go a long way to bringing more of a level playing field. We welcome the initiatives and we hope that it will do as planned, which is to continue strengthening the steel industry in the UK and the supply chain of the steel industry as a whole, because we see that as vital. Obviously, there's a massive over capacity of steel in the world, and having our part in that big global scale in the UK can only be achieved with the alignment of Government and the players within the market. So, we see it as very beneficial and hope to be as supportive as we can in terms of seeing everything realised with the trade measures.

You used the word 'bold' there Laura, so I presume it went further than you expected, or was it roughly the package of measures that you expected? Perhaps you could give us a sense and a taste of how these measures are going to help your particular company have confidence to invest and obviously secure the future for steel making here in Cardiff.

Yes, broadly speaking, they were, I suppose, as we would have anticipated. I think there were some measures indicated that look as though they could be more aggressive than we'd anticipated. I think it's just looking at how that works with the steel industry as a whole and the support to the downstream as well, in terms of making sure that there is the understanding that, obviously, imports aren't going away, it's just the balance of import and domestic supply that is an important balance to have.

In terms of how we see it within the company ourselves, 7 Steel, it's giving more of a fair playing field I suppose, because obviously it should limit and protect against the dumping of material that is a lot cheaper and that will put off balance the pricing and the industry and the profit making there, that can obviously be done by all parts of the steel industry, not just by the mills and not just by the downstream, but by the industry as a whole.

You used the term there, I think, 'levelling the playing field'—that's actually what I've written down here in my little file of notes. Is there anything missing, though, that you think that the Government could have looked at? I mean, you've used the word 'bold', you've used the sentence 'levelling the playing field', but is there anything missing that could secure the future more into the distance rather than maybe the short term that currently will be protected by these measures? 

No, not missing as such, no. I think it's obviously about just seeing the implementation now and how everything works with it: the impact that it has on the downstream, on the customers, and the reaction from the market to the measures. And it's also about seeing that in tandem with other things put in place in terms of the electricity and procurement policies in terms of bringing up the, I think, it's from 30 per cent to 50 per cent—the discussion of UK procured material. So, I think it all works in tandem. So, I don't think we're saying that there's anything missing, but obviously, we've just got to see things come to fruition and see how it plays out in the marketplace.

How achievable is that 50 per cent? I mean, as you said, you're going from 30 per cent to 50 per cent. It doesn't take a mathematician to work out that that's an extra 20 per cent that's got to be found. That's going to be quite inflationary to end users, is it not? And so, when you're thinking of the end user in this, that's very often either the public sector paying more for the product or the private operator adding cost to the contract.

Yes, and I suppose, as with any business, if costs increase, then it needs to be felt through—it can't just be felt on one part of the chain because otherwise things tend to fail or projects might be stopped. So, again, it needs to be done in a way that is sustainable and that businesses can work and that manufacturing and projects can thrive.

And I think we believe that it is an ambitious target, obviously, but that there is supply within the UK that can fulfil that and that that is what we should aim to reach. So, yes, it seems like quite a big jump, but obviously there is capacity across the mills within the UK and within the projects and the downstream of the steel industry as well.

So, that constraint, you don't see as being inflationary to the steel sector—it can be supplied from existing capacity and it's not something that's got to wait for capacity to be brought online, onstream?

No, I think there will be an element of investment needed in parts, but I think there is obviously within the UK—I mean, there's export. I can't speak for other businesses, but we obviously export. So, there is capacity to move more to the UK if needed. So, I imagine, from my understanding, that that is similar for other producers of steel and also other parts of the downstream. So, yes, I think there's capacity there already. I wouldn't like to put my name to it and say there's definitely the full capacity needed without further investment, but I know that companies are already working to increase that, as are we with our general capacities and looking at furnaces and things that we're implementing in 7 Steel in particular.

Okay, thank you. Jenny.

Good morning. You say in a recent blog that was shared with us that 80 per cent of the UK's steel scrap is exported and that that's something that needs to change. So, what needs to change? Because the steel scrap industry, surely they're going to be keen to be selling to customers in this country rather than having to ship it abroad in an uncertain world.

I would agree there's probably an element of that—that you'd think they'd prefer to work on home ground—but I suppose the trade is already well established and it is an export market at the moment. So, changing those trade flows—I mean, some of them will naturally change with restrictions that come in and different things that happen globally, as you've suggested. But I suppose if those trade flows are there and they are straightforward to the minds of the scrap suppliers, then it obviously will take some work to redirect those trade flows and make things work in a way that is beneficial for both parties within the UK. So, I think it's a business case more than—. Well, definitely, it's down to business, isn't it? It's down to the negotiations between supplier and customer, and making that work for the parties involved.

The Tata EAF facility isn't going to come on stream until the end of 2027 at the earliest. Do you expect the cost of your raw materials to be steady state in the meantime? How are we going to make this transition, which it seems is fundamental if we're going to make this new strategy work and make us less dependent on external factors?

I'll come in on that. At the moment, as you said, 80 per cent of scrap is exported, and we're the largest user of recycled steel in the UK, at 1.2 million tonnes a year. That still leaves an awful lot of scope for EAFs to come on line. Port Talbot coming on with a 3.5 million tonne electric arc furnace still doesn't bring us up to half of UK scrap steel usage. So, there's still scope for that.

It's the wider possibilities that the steel strategy takes us to, particularly Scunthorpe, if that moves to electric arc furnace, and the current facilities that are in administration in the north of England. When everything comes back on line, we're still not using the full UK scrap market. But there are obviously huge changes there in what that market currently undertakes and exports.

I'm not sure if it's in your briefing pack, but the steel sector and the lead recyclers put a White Paper to the UK Government in December last year, and we're very pleased to see in the steel strategy that that's been recognised, and that there's a working group being established in May, across departments—and I'm assuming it's with sector representatives—to look at how scrap as a valuable natural resource is handled going forward.

One of the things I'm interested in is how you make the quality steel that you're going to need if you're going to keep a wind turbine up in a force 9 gale, or indeed a tall building, versus the much lower quality needed to can a tin of tomatoes. 

I think that's reflected in the steel strategy, where it says that a lot of investment will be needed in the sector, so a lot more working to the technological side of the recycle sector. We've got a shredder in Cardiff, quite a large investment a number of years ago, which sorts the recycle material we have. And then, yes, depending on what products are being produced by the various companies, you need different quality of scrap, and that's where that technological investment is going to be needed.

As you alluded to in the first session—and it's in the steel strategy—there is that funding available, that £2.5 billion, or the national infrastructure fund. So, it's how that develops in the next few years, but we certainly expect, and the White Paper we put to Government highlights, that need for investment in the scrap sector.

So this is something you expect the recycling working group to take forward. 

Yes. 

And that, you hope, will address some of the other issues that you highlight around the downstream and the upstream skills we're going to need, which doesn't seem to have been properly addressed in that transition board out of Port Talbot. That doesn't seem to have been the overarching objective, to see, 'Well, what are the skills we're going to need in the future?' So, how are you expecting that to—?

I think skills is an area we can talk about. It's obviously an area of devolved competence for the Welsh Government, and steel and metallurgy are going to be a big part of south Wales's future from the steel strategy, looking to rise to 50 per cent of UK steel production. I know my colleagues in our human resources area are very keen to work on how we can develop skills, apprenticeships, training in Wales.

I think there are areas around bespoke skills courses in metallurgy, which aren't there, but they have been in the past, and how that's implemented in Wales. I think there's an opportunity for Wales to lead in this area. A bespoke training school is something we'd be interested in. I think colleagues will be looking at that and seeing what we can do with the next administration in that area, not just for 7 Steel, but obviously for Tata and their various sites across south Wales.

On this £2.5 billion investment that the UK Government has committed to this transition, what would your top priorities be for how that money should be spent?

At the moment, we're just trying to find out, and UK Steel are leading this engagement with Department for Business and Trade officials, exactly how that funding is going to be distributed—whether it's loans, whether it's grants, how the access can be through that. But I think investment in the sector is something that all the players would want to access. How that's achieved is to be decided. But I think our history of investment in things, like I said to you about the recycling shredder, and you might move on to our hydrogen-enabled section mill furnace, that's something we're developing in partnership with Government. So, that type of capital investment is something we'll be looking at. That kind of clarity on how that fund can be accessed is something we'd want to look at. Similarly, I mentioned to you, in your previous question about skills, that a skills school could be something that we might want to look to advance in south Wales across the sector. While it's been announced last week, and we're familiar with that £2.5 billion, it's not really new money; it's been announced previously. How we access that and what the mechanisms are and what it can be used for is something that we are waiting for that detail on from the UK Government.

Lastly, there's a lot of concern by every household about the impact of the war in the middle east on electricity prices. How vulnerable is a business like yours in this situation?

We're heavily reliant, obviously, on electricity supply, being an EAF production facility. There have been steps taken previously to try and support manufacturing within the UK, and we feel that more focus needs to be continued with that, especially with everything that's going on globally. That will be vital for our business going forward, having reliable sources of electricity and at prices that mean we can continue to maintain production and continue working.

There have been indications in the press that energy-intensive industries are going to get reductions of up to 95 per cent in cost. Is that something that you're certain is going to happen?

I think there are superchargers and everything. From our understanding, there wasn't much new discussed in the steel strategy in terms of support on the electricity and that kind of thing. However, we do understand there are negotiations ongoing in terms of access to the EU electricity supplies as well. Obviously, how that comes out will be key in terms of having that market availability and the co-operation with the EU, whilst also trying to maintain, I'm sure, what is a difficult balance with people's requirement for the independence from the EU, which has been pushed for. You might have more to add, Ceri.

I think Laura has summed it up. Even before the middle east crisis, energy is a major issue for high-energy-using industries. The middle east crisis has really shown quite clearly how vulnerable we are in those areas. I think it's fair to say our plant uses the same amount of electricity as the city of Cardiff when it's turned on, so you can imagine the costs of that.

In terms of the UK Government, Laura mentioned the supercharger, and there's the network charging compensation scheme coming in shortly. But I don't think it takes away from the underlying issue around wholesale energy costs in the UK, without the middle east increasing costs. We'd be looking, and UK Steel will be leading for us with Government, at addressing those UK energy prices.

There are suggested ways around that, such as a contract for difference approach, so that we would have a baseline against European energy prices, and if it's more than them, we get the contract for difference; if it's less, we pay the Government. So, there are various options the sector are looking at and putting to Government. But those wholesale electricity prices, without thinking of the middle east, are still a major issue for high-energy-using industries.

One final question from me: how much of the energy you generate is being fed back into warming Cardiff?

I don't know.

I don't believe any is at the moment, but that's certainly something, I'm sure, with our history of sustainability and environmental and technological investment, that we will be looking at.

Thank you. 

Two points from me, if I may. Laura, you said about the facilities in the north-east, I think you said, that are currently in administration. Is that referring to Liberty Steel's assets or are there other assets that are in administration that you're referring to? 

It would be Liberty Steel, I think, that's in administration. I think on the merchant bar side, there's Liberty Merchant Bar that's there and currently not running, and there's obviously the Government-owned Speciality Steel UK, which I think is partly running. There are two sites up there, but there's obviously latent capacity within the UK that we're aware of.

And the other point: the steel strategy talks of this £2.5 billion. It was a manifesto commitment from the Labour Government if they were elected at the general election, which they were. Do we have any understanding of where the £2.5 billion came from? Or is it just a big number that was put in? Is there some logic in the £2.5 billion figure? 

Ceri might have—. I don't think—

No, not that I'm aware of. 

There's no logic?

I'll speak to UK Steel and find out exactly where that might have come from.

It would just be helpful to understand, because it is a big number and the Government deserves credit for putting it forward, but it's trying to understand what it's actually going to buy and is there a plan behind it. I've yet to hear an explanation of how they settled or arrived on £2.5 billion. Sam. 

Thank you, Chair. To carry on the discussion around scrap steel, if I may, obviously, with a potential competitor down the road in the near future, what challenges could that give to steel creation under EAF here in Cardiff for yourselves? 

I think, from our understanding at the moment, just broadly looking at it, because obviously we've been aware of the investment and the upgrade or the change from furnace, there are potential concerns over the overlap of the requirement of scrap. Our understanding is that there will be different grades of scrap required, so the overlap shouldn't be that great, necessarily, in all aspects. And as Ceri has already referred to, there should be more than enough scrap available for us to pool from.

I suppose the other thing that might be discussed is the knowledge and skills space of working with EAF, but we would hope that there could be some kind of, again, sharing of knowledge and helping to facilitate the UK steel industry as a whole by sharing the knowledge that we have as a company that's been working with an EAF.

So the quantum of scrap is fine. The quantum of quality scrap—is that okay as well? 

To the best of my knowledge, yes. From the discussions I've had with our scrap team and CEO, there's not too much concern over the impact on the quality. Again, I wouldn't be the expert on that.

That's fine. And then in terms of the actual end product, the overlap, as you call it, is minimum. So there's a place for both Tata and 7 Steel UK in the delivery of steel via EAF, and the pie itself is big enough for both to be successful, competitive and profitable.

Yes. 

Okay, that's really helpful. And then obviously, there's the project hydrogen energy mill that UK Government have helped fund, operating 100 per cent on hydrogen fuel, which is amazing. Talk me through that a little bit, around some of the potential challenges of getting the hydrogen, first of all, and delivering the project. What is the end goal with this project as you see it from your company?

Just to clarify, it won't run 100 per cent on hydrogen. It's 100 per cent hydrogen enabled, so it can use hydrogen, but when it comes online in 2027, 2028, it will be dependent on the provision of the hydrogen and costs, obviously. But that's what we're working to, so that it'll be working towards that 100 per cent hydrogen fuel source.

Tell me a little bit more about it, then. So, you're not reliant on hydrogen on day one to run it. The fact that we're pretty behind on hydrogen production in the UK, and there are opportunities around the Celtic free port for hydrogen production, and there's an announcement that’s been made of a hydrogen production facility in Milford Haven just recently, £50 million—that's not conducive to this being successful. This project will be successful regardless of whether hydrogen's being produced, but it can use hydrogen at some point in the future. Is that correct?

Yes. We very much position ourselves to take advantage of that new technology as it develops, and, as you've just alluded to, there is a risk around hydrogen production and cost, but also we're aware—. Well, we're aware of a number of south-Wales opportunities to produce that hydrogen, but we will be using it for the furnace at considerable scale. So, yes, the sector itself has to develop further to support our technological approach to prepare for the future.

So, you see this as a futureproofing project?

Yes.

Yes. Okay. In terms of that project then, can you just expand? Does it change any of the provision and the output that you have in your site, or is it just in addition to, and you'll continue doing what you're already doing, but it will be in a more sustainable, decarbonised way?

It's both. So, it will obviously work more towards the decarb goals, which are forefront in our business strategy, but it will also increase our capacity for the merchant bar production and the light sections that we're already doing. We are looking to upgrade our rolling mill at the same time to take advantage of the increased capacity, so that we can do the products we're doing better, or more, but also increase the range as well, so that we can look to do slightly more into the heavier side of the sections—not touching anywhere near the amount of the sections market, but it will allow us to have some supply there, which we can see demand for in the UK. So, it will, again, allow us to support the UK market in the downstream.

Okay, thank you. Ceri, anything to add?

Well, just because I've got the briefing in front of me—and I can share our hydrogen notes, if they'd be useful for the committee, bearing in mind it's your last session—the new investment, any kind of capital investment on a plant, which I think this particular rolling mill I saw the other day was in the 1970s, any kind of capital investment brings that modernisation in the technology we're using. So, there are things around refractory linings, the process monitoring, which all improve the metallurgical quality control. So, it's wider than just hydrogen; it's in that wider production capacity.

Okay, thank you. I have got a question around payment.

Can I just ask Jenny? She's got a supplementary.

I just want to know what portion of this hydrogen is likely to be green hydrogen, as opposed to blue hydrogen. 

I don't think we can give that at the moment. The project is in a phase where, as I just said to Sam, sourcing the hydrogen is an ongoing project. So, green, blue—. I'm just trying to think of the companies in south Wales. I think the one that I've spoken to around the Neath and south Wales area, I think that is in the—. I get mixed up between green and blue, but it is the more—. It's the blue hydrogen, I believe.

Okay. Because, obviously, the decarbonisation objectives are, in the longer term, that we produce hydrogen from renewable energy rather than—

Yes. I think that would be part of our aspiration as well with what we're trying to do in Cardiff. But you are reliant on the provision. As I said, if we want to use hydrogen at the moment, the industry is in such an infancy place that we'd be looking to see what the sector can provide, rather than dictate what we want in the first instance.

Thank you.

Sam.

I was just going to say that there's a final question that I'll allow Luke to go on to, with his expertise around it.

Scrap. Luke, sorry.

I'm not sure saying that my expertise is in this area is fair, but one of the things I have been trying to do is to get under the bonnet a bit around the question of scrap steel and how an electric arc furnace works. I think it might have been one of your predecessors, back when Celsa was in control of the site, who mentioned to me that the only time I'm ever interested in what's going on in Celsa, or, in this case, 7 Steel, is when something's happening in Tata in Port Talbot, which probably is quite fair.

But one thing I'm trying to get an understanding of, after conversations with scrap steel merchants, is around payment terms. What they put to me, and I put it to the unions in our previous session, is that, as far as they're concerned, when they look to export their scrap steel, they'll get paid the minute it's on the boat, essentially. But when trying to sell, then, to 7 Steel, Tata, they have to wait a while before they get paid. That's sometimes 60 days, sometimes 90 days, sometimes beyond that as well. What I'm trying to get an understanding of is why are the payment terms so long in that case, and why did some of these scrap merchants have to wait a significant amount of time to get paid. Because I'm just thinking now, if we want to incentivise people to supply the domestic market, it's very hard to see how you can encourage them to move away from getting paid the minute it's on the boat to having to wait and, essentially, give a line of credit.

I'd say it's probably fairly reflective of—from my knowledge of it, and I've been in it for 13 years—the steel industry as a whole in terms of the full supply chain, as to how people are working with payment terms and payments from projects to then the fabricator, or whoever in between, and then to the mill, and then, obviously, mill on to supply. I don't think that means that it can't be changed, but, obviously, there would be work needed to be done to ensure that the payment terms were as required to make it, obviously, an incentive.

What would be some of those challenges, out of interest?

Well, just getting the flow, I suppose, of the payment terms. Obviously, if mills are expected to pay pro forma for scrap, then we'd be needing to get the cash flow in the wider business. But, again, I suppose it's down to the individual negotiations with scrap companies and making sure that negotiations benefit—or, sorry, the end contract benefits—both parties.

In terms of the challenges, again, as you say, or as I mentioned earlier, the trade flows are well established—it's kind of old habits, I suppose—so, it's finding a way to work on that and change them. And I suppose any incentives that could be offered—. Again, we don’t know where the £2.5 billion number is coming from, or if there's a portion of that that could be attributed in terms of incentives for scrap going back into the UK market and something along those lines to make that more appealing, alongside, obviously, the individual negotiations and seeing how we can work on that.

So, you see, potentially, that working group that's being set up as being some way to explore what could be done in this area.

It's certainly going to look at the scrap side of it. The payment-specific side of it will be, obviously, on a company-by-company basis, how that works. Again, it's not one I'm totally prepared for today, but, subject to the time of the committee, I can certainly feed back on that. But also, talking about scrap, one of the things that I think may be different to Tata's approach is that we actually own and run our own scrap yard. There are four scrap yards across the UK, from which we buy and collect scrap in that vein and then transport it to Cardiff by train and truck where, then, our main scrap yard in Cardiff shreds it. I think that's going to be something that the sector's going to need to look at further. But there are a number of players—large players and small players—in the scrap sector, so, how those individual contracts work, it's going to be, as Laura said, business by business.

Yes, there are a number of different sized operators within—

Yes, there are a number.

And I appreciate the complexities of it.

If I could just move on then, to—. Well, I say 'move to', but I'm actually bringing us back a bit to some of the initial questions that were asked by the Chair around what, potentially, was missing within the steel strategy. I just wanted to touch on the road map that I think a number of us were hoping to see within the steel strategy, setting out where investments would happen and how they would happen. I'm conscious, again, of what I said earlier about your predecessors saying I'm only ever interested in what's going on down your end when certain things happen, but I would be really keen, actually, to get an understanding of where you would see 7 Steel and your operations playing their part within the wider steel strategy. And what I mean by that is what sort of investments do you think, actually, would benefit you guys down your way, apart from updating some of the lines you have now and the technologies that are being used: where do you see yourselves fitting into that overall picture of the UK and Welsh steel industry?

I'll briefly say, again, it comes back to skills, and the growth of the wider community as well, and the balance around 7 Steel as a strong employer and a strong contributor to the Welsh economy, would be my—.

Yes. I think there's a lot we could do, but it comes down to resources in terms of developing the projects, as well as delivering the projects. So, at the moment, we've got the hydrogen furnace on the section mill, so that's under way, which takes a lot of resource; it's on top of people's day jobs. So, it's having that ability to look at new projects. So, certainly, I would imagine our second rolling mill, which is, again, late 1970s, we'd be looking—. If there was funding both from public sector but also if there's the security in the industry to provide that kind of security for capital investment—which is what the steel strategy is trying to do as well, to provide that security for the private sector to invest—that would be another project. To maintain a modern steel mill in the UK, you need all sorts of environmental requirements. We run two water recycling sites on our Cardiff site, so that type of issue could well be an area for investment.

On a personal note, I particularly liked Jenny's question about heat use around local heating networks—we're quite close to the one in Cardiff—whether there's potential to feed into that and how that might work at a business level. So, there's certainly scope to look at utilising this funding, but it's not just about having the ability to spend; it's about the resource to plan and prepare for these projects.

So, that very much, then, would chime with what you think should be the priorities, then, of not just the next Welsh Government around the steel industry, but also the Senedd more widely and the successor committee to this one.

Yes, I think there's an awful lot that the successor committee could look at. In terms of devolved competency, skills and apprenticeships are something we'd definitely be interested in talking about. But this committee and the future administration, we'd be looking to be very firm advocates, and I think Welsh Government to date have put out some very supportive messages for what we were trying to do pre the steel strategy and since it's been published. I welcome that support, and we'll be looking for the future administration to do that as well, because the big ticket items we've talked about here around scrap, around energy, particularly public procurement at a UK level, are in Westminster. So, we will be wanting the successor committee and the future administration to really advocate on our behalf and the wider sector in south Wales.

Do you want to add anything, Laura?

No, just that we want to be in the future of the Welsh economy and we will look to make that our goal.

Just on a personal note, the skills school, I'm really interested in that idea. So, hopefully, that can be something we can develop over the next Senedd term, definitely. But I'll hand back to you, Chair. Diolch.

Just a brief point from me. You talked, Ceri, about the second roll mill that you're putting in, I think you said, on the site. I don't want you to put it to the nearest pound, but just to give an indication to the committee of what level of investment that would be, are you able to give us that figure?

It's not a second mill. So, we've got two rolling mills at the moment. One we're transferring into hydrogen ready and taking that opportunity, as Laura said, to make improvements to that wider rolling mill—so, the products and capacity we can put on that. I think that project in total is £30 million, between both our investment and from Government. So, I'd imagine something similar for the second rolling mill as well, but it would need our operational team to give you final details on that.

I just wanted to try and get a handle on the level of moneys that we're talking about when you're talking about such projects. And the final point, the unions were in before and they touched on the importance of that steel fund, the £2.5 billion. Some of that is being used for the day-to-day running costs at Scunthorpe, and, obviously, we learned this morning that that's being paid for in a loan capacity. But the steel strategy didn't indicate where that £2.5 billion, or whatever's left of it, is being allocated. Would you see that as a priority, to understand exactly how that fund is to operate, so that you as a company can consider whether it's beneficial to you and make use of it? Because I presume at the moment you know the quantum of the figure, but you don't know how it's going to work.

Yes, I think that's probably the nail on the head. It's good to understand where the money is, where it's going, is there money left, what's the timeline, if it's coming back, if it is a loan capacity, what's the projection for repayment, and how does that impact that overarching figure of the £2.5 billion. Obviously, knowing that there is finance available for further investment within the steel industry as a whole is brilliant. If we can have some of that investment, the more the better, because, obviously, as I say, the aim is to strengthen and be a good business within Wales.

And you've been given no indication by the Government when the terms of reference or the criteria might become available to you as an operator within the sector. 

No, not as yet. As I mentioned, we're under the UK Steel umbrella and that's one of the areas they're pressing quite strongly on DBT to find out initially. As I mentioned on resources, our focus at the moment is on your initial questions, around the trade safeguards, tariffs and quotas, which aren't publicly available yet, but we've had those through on the commodities we produce and we're doing the analysis on those to see how that will affect, and working with DBT. So, that’s our focus, firstly, on the steel strategy, but reliant on UK steel to pick up a number of other areas. Because as Luke said, ideally it would be a detailed road map, but it is very much that high-level strategy with a lot of the detail and delivery aspects to follow in due course.

And my final point: how inflationary are the events in the middle east to your business? Are you starting to get notices of price increases, and what sort of level are you talking about? I was talking to a plant operator the other day—they’re trying to put a 6 per cent fuel surcharge on as well as other surcharges. I presume it’s hitting your business as well, is it?

Yes, we’ve seen increases already—energy obviously being the main one, any increases there—and we’ve also seen forecasts of further scrap increases, fuel surcharges, freight costs going up. We do some business with vessels and we’re seeing already that some of the business that we’re doing is impacted by an increased freight cost there. I haven’t got an overall percentage number, but, yes, we’re seeing significant increases across the board.

I appreciate you don’t want to put an exact figure on it, but you've seen significant increases already?

Yes, already.

Okay, thank you. Any other comments you’d like to leave with the committee before we shut this session down?

One final comment is just that whatever the next administration is and the format of this committee, we would like to have an open offer to the committee to come in to 7 Steel and see exactly what we do. We have got a large electric arc furnace—as you see in the strategy, that’s the future the Government are taking us to. We think we’ve got a very, very good story to tell in terms of circularity. We use British scrap metal, melt it down and then sell it back into the British market. Some examples of the complete circularity loop, so from demolished buildings going back to fresh rebar. And we think that story is something we’d like decision makers to know, and whether it’s around steel, skills, construction, I think we’ve got something that the successor committee would be interested in hearing about. So, that’s an open invitation from day one.

Thank you, Ceri, for that. I’m sure the clerking team have picked that invitation up and will run with it. Some of us hope to be back here, but the electorate might have different views on that, so we’ll see how the Senedd convenes.

The Record will be sent to you to have a look at, so that you can either raise any concerns or leave it to stand as the evidence that you put before the committee today. I thank you for coming in and giving your thoughts on this evidence session that we’ve held this morning. Thank you.

Thank you.

Thank you.

We'll go into private session while we get ready for the next set of guests.

[Inaudible.]—committee and our evidence gathering on the steel sector. We have representatives of Tata Steel in front of us today, and I ask you to introduce yourselves for the record, please, and give your positions within the company. I'll ask you, Russell, to go first, and then your good self, and then we'll go straight into questions. 

Good morning, and thank you very much, everyone, for inviting us here this morning. It's a really important day for us. Myself, I'm Russell Codling, I'm a commercial director within Tata Steel. I've worked for the company for just over 30 years or so in many different roles, and I've been very heavily involved in the activities around building a position towards a steel strategy and working with various members of Government towards that end. So, good morning.

Thank you. Good morning. 

Good morning. My name is Vlad Darahan. I'm the head of international trade and compliance at Tata Steel UK. I look after everything trade—tariff rate quotas, trade defence measures, sanctions, expert controls, things like that. It's a pleasure to be here.

The announcement was made last week on the trade protection measures by the UK Government. What's your view on the package that was announced? Is it a helpful package that will secure your long-term future in the UK steel sector? And is there anything missing from that package that you'd like to see added that would have enhanced the offer that is being made to the UK steel sector to have confidence to invest and to create more jobs here?

Thank you for that question. The measures that were announced last week were very welcome indeed. We're very pleased to see a strategy now announced. It's very important for the steel industry right across the UK. We've certainly been highlighting some of the concerns that we've had in recent years. You'll be aware that there is a measure in place called 'safeguards'—Vlad can talk a little bit more on the detail of that—but they come to an end at the end of June. They were put in place in response to the US's section 232 actions in President Trump's first term. And progressively over the many years since, they've been liberalised to a point that those safeguard quotas are at a level that probably exceeds the total level of demand we have for certainly the products that we produce within Tata Steel. So, they're completely ineffectual as it stands at the moment. Unfortunately, we've lost market demand since COVID, since Brexit. The demand has dropped and the quotas have expanded to those safeguard quotas. So, we've been left fully exposed to the aggression, global aggression, of massive levels of oversupply of steel from around the world.

Just to put that into context, just last year, through 2025, we saw levels of exports of steel products that hit record levels. China was exporting something like about 119 million, 120 million tonnes last year. That's in its exports alone, let alone its own consumption. Those exports, 120 million tonnes, to put that into context, the EU's consumption, the whole European—including the UK—consumption of steel is only marginally above that at 130 million, 140 million tonnes. In the US, the whole total demand in the US is only about 80 million tonnes. So, we're talking about exports that dwarf the scale of the total demand within Europe and/or the US.

So, we've been exposed to—. Despite the fact that there are many different measures that many countries have put in place over recent years, the US, as you may well know, has put in place tariffs amounting to some 50 per cent on imports of steel and aluminium products in response to that huge level of oversupply. And in Europe, they've recently announced a halving of their quotas or a new quota system to replace the safeguard system—technically quite different—and that's led to big concerns for us a steel company here in Wales. That halving of quotas for import into the EU will have direct impacts on us as a steel company in the UK. We clearly are a domestic producer in the UK, but we also do export a considerable amount of our output, and the EU is our main trading partner in that respect.

So, we've been very concerned, and we're making those points known, and I really appreciate the support of the Welsh Parliament here and the Welsh Government here to make those cases as well for us with Westminster. We've been working with the Department for Business and Trade, for probably 18 months or more, setting out the requirement for some form of protection measure to come into place after the end of the safeguard system that expires at the end of June.

So, a big part of that steel strategy, and obviously trade's not the only part of that steel strategy, but a big part of that steel strategy that was announced last week was identifying the UK's response to that. And as you'll probably be aware, the response to that translates into a tariff-rate quota system that identifies a level of tariff-free imports into the UK and a 50 per cent tariff that goes beyond those tariff-free quotas.

There's still lots of uncertainty ahead of us with respect to where the EU position lands, because whilst they've identified, at a very high level, their intent, they have not yet announced what that means for different countries or different products. And for us, we're still in a pretty uncertain space.

However, from the point of view of the Government's intent, the announcement of that steel strategy and the aspects related to trade and other areas are very welcome by us, but there are still a number of areas of work to be done, and not least to understand the context and the consequences of the EU position.

So, in short, we very much welcome and we really, really appreciate the support of the Department for Business and Trade's work in preparing for this and the work of the Welsh Government in engaging with the Westminster Government in respect of that.

Okay. Before I ask Alun to ask his supplementary, I'll just go back to the point—. I think, from your complete answer, you don't believe that there's anything missing from this package of measures, because, obviously, you drew our attention to the entire package in your summary of it all and, therefore, it is a complete package of what you wanted as a sector.

I think I welcome the totality of it. There was an intent there that sets out a pathway towards a UK share of steel production in the UK, which I think is the fundamental headline associated with that strategy. There are a number of different elements that sit within that strategy, and trade is one, and as I've identified, there's still a lot of uncertainty that plays out in respect of the EU quotas. But the mechanism as it stands is the right one. The details—I think we've got a lot more work to do. Perhaps I can invite Vlad to comment on that in a moment.

I will offer Vlad the opportunity to comment, but I'm just keen to bring Alun in, because he had a supplementary on the point you were making.

But in terms of the full answer to your question, there are many other elements within that strategy: public procurement, the aspects in respect of scrap, energy costs and other issues. Clearly, today, energy is top of the agenda of many businesses across the world, currently. Notwithstanding that, we're still operating in a space where we've got high energy costs in the UK. And despite the strategy having identified a number of improvements on energy costs in the UK, the wholesale energy costs for operating a business in the UK, particularly in an energy intensive industry like steel production, we really would look to the Government to make further steps on that front to make sure that we're competitive with others. Currently, for instance, notwithstanding the current crisis driven from the middle east, the UK's wholesale energy costs are nearly twice those of a number of our European competitors in France and Germany, and that's something I don't think is really addressed.

In fairness, that will be drawn out in questions from Members as we go through the session. Alun.

Yes. Thank you very much for that. It is that interplay between the UK and EU policy that I'm really interested in. The EU-UK Parliamentary Partnership Assembly met last week in Brussels, and this was a major topic of conversation because we knew then that we had the UK strategy coming out, which would include these measures, but we don't know, and we didn't know, of course, where the EU are. So, I'd like to understand, from your perspective, the interplay between these two policies. I would expect that you would want to see them co-ordinated very closely or, in fact, intermeshed in some way to ensure that you've got consistency of policy from across the UK into the EU.

Do you want me to take this? 

Yes. Over to you.

Obviously, the UK operates a separate stand-alone trade policy with respect to the EU, but I agree with you that we would like to see some kind of co-operation, co-ordination, when it comes to these kinds of matters, mostly because they address the same root cause of import pressure, which is steel overcapacity around the globe. It's not just limited to one country or two countries; it's a global phenomenon. I think both EU and UK industries are interested in a mutually beneficial agreement, kind of preferential access to each other's markets. We know full well that we are not causing a distortive impact on the EU steel market, and we think that the EU is a fair competitor in the UK, and the kind of competitor we are happy to compete with. So, there is a very strong case for a co-ordinated response for a mutually beneficial deal when it comes to EU quotas and UK quotas.

As Russell mentioned, the EU have outlined the broader quotas, the ceilings that they will impose as of 1 July. They did not specify any kind of country-specific allocations or country-and-product-specific allocations at this stage. To the best of our knowledge, negotiations are under way between the EU and the UK. They're very complex. Obviously, both partners are engaging with many other trading partners beyond each other. So, I think there are certain natural complexities around that, but we, as Tata Steel UK, would very much welcome a co-ordinated response and a mutually beneficial agreement.

And you'd want some sort of level playing field between them.

Exactly.

That's fine.

Hannah.

Thanks, Chair. I think, Russell, in your introductory remarks, you touched on the recently published steel strategy that the UK Government own, and you had some involvement in that. Do you have any initial reflections on whether the strategy is sufficient to meet the challenges? And to what extent would it give steel companies such as Tata the certainty to deliver long-term investment in communities in Wales and across the UK?

Thanks for that question. I've touched on the trade aspects of that, which are clearly very important for us and are very live issues for us. So, I think, yes, it does give us the framework. The goal of achieving 50 per cent, which is a movement from the 30 per cent that the UK steel industry serves the UK market with, the goal of moving that to 50 per cent is highly welcome. It's quite conservative, however. I mean, you take a step back in time and I think we were serving the UK with more than 80 per cent of its requirements.

We're a global company. We're in a global market. We've got a number of key strengths that we can be very competitive on that global stage in free and fair trade, and we succeed in producing steel here in Wales, and producing products, that we can be competitive with in the US and other parts of the world, in the middle east and other areas, and we want to continue to be able to do that. I think getting that strategy into place and starting to see it deployed will help give us the ability to be more competitive. But we still operate in a very unfair environment where there are levels of subsidies and support from, most notably, countries, perhaps, towards the far east, that find their way into supply chains closer to us, and then we have to compete on that material that's been produced in areas where there are direct subsidies for those products, and that is unfair. It's very difficult for us to turn a decent profit on that basis, and to be able to turn that into something where we can invest in our business and grow from that point.

The strategy starts to set out some of the elements that facilitate getting us back to a fair and level playing field. It's got a lot more work to be done. It's not the end of the game. We've talked about the fact that the EU has yet to announce their specific measures against the UK. We import from the EU twice as much as we export to the EU, so already the EU benefits from the UK market more greatly than the UK does from the EU market. So, I think we've got to be working on making sure that is a much fairer alignment.

The basis on which our European competitors operate is a much more closely aligned fiscal regime, with carbon taxes and emissions trading schemes and other features of that nature, but there are still many areas where there are inequalities and, as I say, energy prices is certainly one of those, where in the UK we have a significant disadvantage. The strategy sets out improvements in respect of things like network charges, and there have been fantastic improvements on that basis.

We also see areas where, from a governmental point of view, there is a lot more bias and direct support towards procurement across other European countries. And I know that there are steps and actions already under way to try to improve that, with procurement notices and intents to procure domestic steel production—steel produced here in the UK—for Government-funded projects across Wales and across the UK. That has to continue and that has to grow further, and the growth further includes indirect areas, because it's very difficult sometimes in steel supply chains to—. Because the UK and Welsh Governments very seldomly directly procure something from Tata Steel or another UK steel company, so it's making sure that the supply chains are all aligned to make sure that UK and Welsh companies are actually in line to win that business. So, those are areas where we really need to see further improvements.

Of course, going beyond that into the next layer of activities, we're really keen on seeing further investment in skills. We desperately need engineers and capable technical skills, STEM-based skills for all of our steelworks, and we absolutely need continued support and effort in respect of research and investment and R&D activities. We're moving into a completely new way of making steel. We're very confident about it. We know that it's going to substantially reduce the carbon dioxide emissions associated with producing the products that we produce. We are at the forefront of the world in making those transitions, and I think that gives us a leadership position and that will materialise in time. But it's continuing to invest in research and making sure that we're capable to be able to bring those new products to market, to meet the future needs of the industries we want to serve.

So, lots more work to be done. The strategy is very welcome, but there's a lot more detail to be gone through.

That's what we've already heard this morning in other evidence sessions, but obviously it's a Government strategy and we talked about the need for Government to invest in the industry and in the sector as well, and obviously you touched on the immediate future of the electric arc furnace and the investment in there at the Port Talbot site, but do Tata, yourselves, have, say, a 10-year plan for the industry that goes beyond that, because to get where we need to be, it's not for Government alone, is it?

No, indeed it isn't. We need to be further developing the scrap supply chains in the UK, such that we can deliver on the goals that we've now got of circular steel products, and I think that is a fantastic goal for us and something that will stand out for us. In the UK here, we have an advantage of a huge amount of scrap steel available to us, and to be able to build on that asset, effectively, that we have as a country, is part of where we see that future. And it delivers a means by which we can achieve substantive reductions in carbon dioxide emissions. That's responding to the sort of fiscal regime we've been moved into, with emissions trading schemes, et cetera. So, those parts are an exciting point ahead.

Just getting ourselves through that transition is not easy. It's a hugely cost-intensive activity, and there's a lot of driving the skills and expertise we've got here in Wales, and the people that we've got, to try and make that transition work. We know that we'll be bringing that electric arc furnace into commission at the end of 2027, and, through 2028 and beyond, we'll be going through the programme of bringing those products up to the standards that we need them to be at to deliver on the end products and end applications we're serving.

Going into a view of a 10-year period, clearly that's a big part of that 10-year period in the first instance, but, going beyond that, there are plenty of opportunities that we're sitting on across our countries here, with the move to renewable energy. The UK, I'm sure, will be looking to progress its energy independence with another hit on the geopolitical front, and the impact on the cost of living that that's going to drive in relation to gas and oil prices. And I'm sure that will only motivate industry, and Governments alike, to accelerate the energy security objectives that the UK and Wales have. We've got huge resources available to us, whether it be offshore wind, onshore wind, solar, nuclear just down the road, and up in north Wales. And, I think, being able to build on those kinds of areas and opportunities is where we can see we've got a role to play in Tata Steel, and making sure that we've got the right products, and the right form of those products, to ensure those investments are a success.

So, I see that as being a big part of how we're playing our role in the future, and where we will be looking to invest and find those opportunities going forward.

And where does the upstream supply chain fit into that, and plans for that as well, because, obviously, you need somewhere for it to go to?

The upstream in terms of the feed of scrap, et cetera?

Yes. 

Well, obviously, the UK output is something like 10 million tonnes of scrap each year. And that plays through in, I guess what we would call 'long cycle' and 'short cycle' scrap. So, there's collecting the material, the ancillary materials we've just produced, and getting that back into our own supply chains, but also the long-cycle products may be materials that have gone into construction and will be in use for many, many years. 

So, we need to invest in that space, both in terms of scrap sorting, making sure that we've got the right materials, and also investing in the visibility of that circularity. It's a resource that we need to nurture and build upon. If we ignore it, it will become contaminated in time, and we'll end up with a negative spiral of the quality of the scrap that we've got available to us. So, making sure that we've got the scrap sorting and the processing capabilities is going to be an important part of the future, us working with other steel companies in the UK in terms of their needs, which will be slightly different to our needs in Tata Steel, and also working in partnership with other scrap companies, and also the collection processes across the UK, to make sure that this material is collected in the right way. Because it's not just about putting it on a big pile and picking off from it; it's about making sure it's selected and used in the right way for the right purposes.

Thanks for that. Just one more from me, Chair. I think you've covered some of what I wanted to ask you in some of your responses already. But I think you touched on electricity prices, and the cost of energy, and the challenges that exist around the world with that. And one thing that's perhaps just missing from the steel strategy is any new measures to tackle that. But I think you've touched on some of—. I don't know if you have any further reflections; you've touched on some.

But we were actually having a conversation in private session before we came back into the session about the kind of scale of the site at Port Talbot, in particular. Does the company have any plans, yourselves, in terms of how you use that land to generate your own energy, to tackle some of those challenges of the rising energy costs, but also to support the grid, which doesn't have the capacity at the moment?

At this point in time, I guess our focus is very much about completing the transition. As I said, it's a very complicated process, heavily resource intensive. We're a steel maker, our expertise is about making steel products, and we've been doing it for decades very successfully, in spite of the global challenges that I've described. At this juncture, I don't think we're currently focused on becoming an energy producer; I think there are many more entities that have got the expertise in that. But, at some point, we will become an increasingly energy-intensive consumer and, I guess, in time, we'll have to look at how that plays out. But, at this point in time, I don't believe we've got any plans to be building power-generation facilities.

Thanks, Chair.

Okay. Sam.

Thank you very much. Just developing on that, then, because, in the Tata manifesto—. Securing timely grid connections for strategic industrial development is part of that manifesto. So, in previous committee sessions, grid access for Tata and the EAF development seemed to have been ticked off quite early, as grid were on side. So, is this manifesto point alluding to actual challenges that have developed since that initial securing of grid capacity for the EAF?

No. I think the grid capacity and the grid connections are a very fundamental and a key part of the investments that we're putting into place at the moment. Clearly, we need a substantive amount of power to supply an electric arc furnace.

And that's guaranteed, that's secured.

That's a process that's under way at the moment. We've got agreements in place with the suppliers associated with that. The investment in getting the plant up and running is fully under way. We've got—

Just back to the wider development for the time being, just coming back to this grid capacity and the connectivity, it was my impression, from previous inquiry sessions with this committee with Tata representatives, that that was green-lit, that was secured and wasn't an issue. What you're saying now, it sounds as if it's not as secure as what was possibly previously said, or is the grid connectivity for EAF at Port Talbot secure, that's no longer a challenge, as in the capacity element of it?

The grid connection needs to actually be enacted. Obviously, the agreements are in place to enact it.

Okay.

It has to be undertaken physically before we can properly operate the plant and, clearly, that work is still to be completed and undertaken in a timely manner.

So, the capacity is there, National Grid have said, 'Yes, you can have it.' It's just the infrastructure that needs to be built to bring that on site.

And the whole process of the investment in the plant is under way towards that objective.

Fab. So, how is investment in the plant and groundworks and everything going at the Port Talbot site now for EAF?

It's very much on track. It's over £1 billion-worth of investment. I think we've committed £400 million or so of that, in terms of the contracts that are under way. We have a lagoon right next door to where the electric arc furnace is being installed, which is right next door to our steel-making plant and casting lines. And a big part of that is partly filling that lagoon. A lot of the work is under way and making great progress as far as that's concerned. We've got a contractor village being installed at the moment, which is aimed to being able to house up to I think it's about over 1,000 workers at peak point. That's all progressing very well. And the First Minister, as well as the Secretary of State for business and the Secretary of State for Wales, visited us just last week as the steel strategy was announced. So, we went through some of that progress with them when they visited us.

Good. That sounds encouraging and goes contrary to what one political party leader has said—he's cast doubt over the viability of the project and that it will never be turned on. So, you, obviously, are far more confident that this EAF project will be successful, will be completed, and steel making will return to Port Talbot in the guise of EAF rather than blast.

Absolutely. We're spending large amounts of money. We're making physical progress towards deploying that against that plan, and we're certainly not doing that with the expectation that it's not going to be switched on at the end of it. So, I don't know who's projecting that it's not going to happen, but I would be very surprised if that was the case.

Okay. And then, if we look at the continent, we have seen some steel-making companies row back from EAF and row back investment due to the cost of energy, and we've discussed with previous panels on this inquiry around the cost of energy and electricity. Is that a concern for the viability of the project, the cost of electricity, or, actually, is this something that's progressing, developing off of Hannah's point?

Yes. I think the steel strategy didn't address the wholesale cost of electricity, and that was one thing that was notably missing, but I think Tata Steel, as an international investor, has put a lot of trust in the UK, in the Welsh Government, in the UK Government, to deliver against a goal to make steel production in the UK competitive in the long term, and there's a whole array of different features that play around that, one of which is competitive energy costs. If you're going to be producing steel in an environment that's utilising an electric arc furnace, then you're going to be very much reliant upon competitive energy. There's a lot of trust in Governments to make sure that there's a competitive environment that's played out, and that the right trade measures are in place in response to what we're seeing across the world, and we've seen those moves start to take effect, which I think is very positive. As I said, there's a lot more detail to go through on that, but that's a very positive first step.

And then there are other trade-related aspects. We're, clearly, investing in steel production in the UK, which is going down a pathway of decarbonisation and reducing carbon dioxide emissions associated with steel, which is all driven by the collective policy environment around reducing carbon dioxide emissions and addressing the issues of climate change. And against that, the other point of trust and confidence is that there is the right trading environment that plays out there, and the carbon border adjustment mechanism that is proposed to be put in place within the UK from 1 January next year is another significant component in that process, because, ultimately, we're potentially putting the UK into a position that produces products at a potentially higher cost, at lower carbon dioxide emissions, with huge amounts of investment, in an environment where, at the moment, energy costs are higher than our competitors. But we need all these pieces to be brought to a level playing field so that we can compete globally and domestically in the right way. So, all of these features have to be brought together to make that work, whether that be planning permissions and good connections and other features that play to that objective.

Okay. Helpful. Thank you. Thank you, Chair.

Alun.

Just very quickly on that, you've been very clear, Russell, in outlining and confirming all those different aspects of what you're doing in Port Talbot. But, just for my own clarity, perhaps, could you just outline the timelines on all of this, where you expect to be over the coming period?

Well, at the moment, the whole programme is focused on seeking to complete the installation of the plant and equipment from the end of 2027 to enable us to start commissioning processes through 2028. That's still the goal. They're still the objectives that we're seeking to achieve. And as I say, at the moment, the installation process, the production of the equipment, the contracting, is all focused on delivering against that timeline.

And you don't have any issues with timeliness at the moment?

I'm sure there are plenty of issues with timeliness.

Significant issues.

As with every contract, every major construction project, there are consistent issues of supply chain availability, managing costs, getting the right transport and equipment et cetera, and no-one was anticipating that we'd have a conflict in the middle east at this juncture, and I'm sure that there will be aspects of cost challenges in respect of energy et cetera. So, I can't guarantee that there won't be some challenges somewhere in the midst of all of that, and I'm sure that the teams that are working on it are managing those points on a day-to-day basis.

Tata has fantastic experience and great expertise in managing all of these different programmes. So, everything you've said, I accept. But you knew that at the beginning, of course, as well. You knew there would be issues as you go through a programme, always; I accept that.

Absolutely, yes.

But what I'm trying to ask you, if you don't mind, is that there are no sort of show-stoppers or anything that are significant roadblocks at the moment.

None that I'm aware that are actually translating as yet into a firm and fixed delay. And as I say, everything we're doing is aimed at those timelines that we set out originally.

And you're happy that you're going to reach those timelines.

Sorry?

And you're content at the moment that you will reach those timelines.

Well, we're still aiming to achieve those timelines. And as I say, I'm sure there are plenty of elements within the whole of that programme that will be presenting challenges.

It's your hesitancy that's leading me to ask further questions.

Well, can I put it this way? In our earlier evidence session with the union reps, they said—and I wrote it down—there will be the need for extra money and a new timeline for the delivery of the arc furnace project. Do you recognise that statement?

A new timeline and—

Well, basically, it's going to go over the original timeline of delivery, so it's going to be later in its commissioning and it's going to cost more.

I don't know that, at this point in time, in March 2026, that I could be projecting that over the next period to draw a conclusion that we've currently got an objective finishing at the end of 2027, that we could say that we're in that position, no. I know that there are plenty of challenges and threats that are likely to play out. And as I say, the costs associated with a conflict in the middle east and energy prices going through the roof, frankly, at the moment—. How on earth could I sit here, or anybody sit here, and say that there is no challenge on a cost timeline in respect of that—or a cost or timeline aspect in respect of that? But, at the moment, our objective remains the same: to complete the programme by the end of 2027 and complete—or commence—the commissioning process, production starting, through in 2028.

Thank you. Jenny.

I want to look a little bit deeper into scrap steel. You've talked about the need to have the right materials for the right job. Do we really have the infrastructure to ensure that we've got the right sorting of scrap in to ensure we've got the right materials for holding up wind arrays, as opposed to making tin cans?

The—. I'm just trying to process your differentiation between wind towers and tin cans. The scrap-sorting requirement is something that will require investment and development over the coming years; there is no doubt about that. We will require a capability that ensures that we don't have contamination. One of those features of contamination, I don't know if you've heard previously, is—. You don't want residual elements, and one of those elements is copper, which is quite harmful to the performance of steel. So, making sure you've got the right performance in the scrap-sorting process and we don't have the wrong materials entering that scrap supply chain is really important for us. So, you can't just crush a car and put that into the electric arc furnace. So, we need to make sure that we've got the right sorting processes in place to ensure that we get the right mix of elements into the furnace. And there's more work to be done in that area, but already there's a lot of work and a lot of capability in the supply chain that already has some abilities to serve some aspects of that. That will grow and develop in time.

Okay. Your competitor 7 Steel has got four scrap yards, and the main one's in Cardiff. Is this not something that is integral to the development of the new electric arc—?

So, the production of other products—differentiating, as you did, with different kinds of steel products—those required by 7 Steel would be quite different to the requirements that we have for different steel grades. The steel grades we require for packaging steels—tin cans and those sorts of areas—are quite different as a steel grade to those required for a structural member, maybe, that's forming a tube or something of that nature. So, making sure that we've got the right mix, part of the investment is a secondary steel-making process, and making sure that we've got the ability to teem and ladle, if you like, the different forms of steel products and the sources of scrap that we've got that goes into the furnace is a really important part of that phase. Steel, as you'll know, is not just steel, and we have to have many different steel grades that perform in different ways, and that is the expertise that we have here in Wales, to be able to make sure that's delivered.

So, you've got your new pickle line, and the former slab storage yard, which is currently being used for the construction of the new electric arc array, is going to be redeveloped into a scrap-handling and processing area. So what's missing from the jigsaw here? You've got those two, which are, obviously, both helpful.

There will be different flows of scrap steel from different parts of the supply chain across the UK, and I alluded to one of those—scrap vehicles—and that will have a certain amount of sorting that's required there to ensure that we're not contaminating, as I say, with the likes of copper. There is other—I mentioned at the beginning—short-cycle and long-cycle scrap. A lot of our customer base will take material from us, they'll process it, and then they'll turn it into a finished product that they're using, and they will have a yield associated with that, which will have a certain percentage of scrap that's produced at that point.

That material, and making sure that that flows back into our furnaces in the right way and is selected and utilised, is going to be particularly important for us, because we can see exactly what material that we supplied to that customer, we know exactly its history, and we can know exactly where it goes back into which part of our process, back into our business. So, there's quite a substantive integration that will be required over the coming years, and that won't be from 1 January 2028, it will evolve over time, to make sure that we've got the right and the most efficient means of managing circularity.

We were party to a programme sponsored by His Majesty the King that was launched at the beginning of last week, and we can see with many other parties in the circular economy there are processes around labelling and tracking and understanding the history or something of where a particular item of material has come from, and that's required for all sorts of aspects of the circular economy and certainly will continue to be required for steel. 

That sounds interesting. When we last spoke to Tata about six months ago, you told us that you were at an advanced stage of work with partners to secure the quantity and quality of scrap steel needed for when the electric arc furnace opens. Is there anything you've hardened up in that six-month period, or is it still work in progress? 

I'm personally not involved in any of those processes, so I'm probably not the best person to ask on that point.

Okay. And just finally for me: how are we going to persuade the scrap steel producers to provide us with that supply of scrap steel to go into your furnace? Eighty per cent is exported at the moment. What is going to make scrap steel operators want to sell to their internal UK customers?

At the very least, it makes sense for scrap not to have to go through a transport process that means that it's going to incur $50, $60, $100 of transport costs associated with it. So, at the very least, the economics of transporting scrap around the world is the first step, which makes it logical that you produce scrap locally or collect scrap locally and use it locally.

Not least then, in time, I think the environmental impact of transporting and producing emissions associated with that transportation is something I think we all have to collectively look at, and establish whether that's the right thing for us to do in respect of supply chains into the future. If we're setting out a fiscal regime of emissions trading, then the emissions associated with material going halfway around the world to be melted somewhere else, to be reimported into the UK, has to be linked back into things like carbon border adjustment mechanisms and other fiscal policies.

But fundamentally, as a society, we've already concluded we've got a climate change challenge. We've translated that into fiscal policies that drive change. Those fiscal policies, like emissions trading schemes, have driven industries and companies like Tata Steel to change their investment programmes. Those all fit together in that bigger picture of carbon border adjustment mechanisms. And then it's whether we want to be buying steel or products that have been shipped halfway around the world twice before they turn into a finished product. So, it's part of that ecosystem I think we need to be looking at.

Absolutely. Is there any role for promptness of payment times that would persuade scrap steel producers to want to divert more of their scrap steel to the domestic market?

I'm not familiar with the payment times or durations that they have today, so I couldn't really comment on any of the changes there.

Okay. Because we've heard that the UK steel producers pay less promptly than some of the people who they're exporting to.

As I say—

You don't know.

—I don't know, I'm afraid.

Okay. Thank you.

The honour of the final set of questions goes to Mr Alun Davies. I appreciate that we're slightly over time, but, as it's our final session, it would be good to ask the final set of questions. Alun.

Thank you, Andrew. You've been very clear this morning in terms of running through some of the challenges facing you in terms of where you are and your view on the wider trade issues—although we haven't really covered much of that this morning. We're going into recess now and we're looking forward to a new Welsh Government being formed in May. So, where do you think the Welsh Government should be going in terms of providing support to Tata, in terms of the company, but also the wider industry and some of the supply chains that you are looking towards creating?

I can cover trade, and then pass over to you, Russell. I think the announcement that we've seen so far with respect to the tariff rate quotas is remarkable in many ways, but the work doesn't stop here. It was never supposed to be a silver bullet that will solve all the industry's issues and problems in one go. That was not part of the design, part of our proposal or request to the Government. So, we always knew that there will be additional steps that the Government will need to take, or we will be engaging with the Government on—issues related to trade, but also to things that have very little to do with trade.

I think, on the trade side of things, we will need to continue to engage with the Government, including the Welsh Government, on the effectiveness of the measure, on the product scope, particularly if Tata Steel UK, or other producers, bring new capacity online, develop new products. How do we go about ensuring that they have sufficient protection against unfair imports, and things like that? So, there is a trade piece of work that will continue to be very relevant for the business, and I do believe that the Welsh Government has a big role to play in that process, with the Department for Business and Trade in Westminster.

I think there are quite a few things that we will request support on, or will appreciate support on, that are not related to trade, and I think Russell would be better placed to talk about those things.

I think that the role of the Welsh Government in this process is in its entirety. Ensuring that the UK Government delivers against that strategy and the goals of moving towards that 50 per cent is absolutely critical for us in terms of ensuring that, as a business, we've got a future in Wales, not least all the other aspects of the steel industry in the UK. So, I think that the Welsh Government, working in conjunction with the UK Government, is critical in delivering on that.

That's the top-level answer, but the specifics in terms of the areas of devolved responsibility and those sort of features, I think there are things like—. We've been a high-value employer in south Wales for many, many years, and I think there's a potential for that to go into many, many decades and hundreds of years to come. Steel is here for the long run. There is no substitute for steel. This UK and Welsh economy is run on the back of steel. There's nothing in and around us that isn't made using or with steel. And if we're going to deal with our economic challenges of the future, we need to have a competitive and productive steel industry that's not passing responsibilities to other producers around the world for making products. We're not just a service economy and we can't just live on services alone.

I think we need the right skill set in place. I keep hearing about AI bubbles, and whether this is something that's real or not. Clearly AI is here for the absolute future, but we need physical skills as well. You can't just use AI to displace human beings. To be able to produce products, to design new products, to maintain and manage the physical supply chains we've been talking about is critical. We need the STEM skills, the training, the capabilities to continue the high-value employment that we've enacted for many years. So getting that in place for the future, I think, and having a good clear programme of skills development for the future is really important. Otherwise, why are we producing steel in south Wales? It might as well be somewhere else. So that's a really important piece.

I think we've also got a very well-tuned and capable infrastructure already in south Wales around research and development, and building upon that—. I think we've just received confirmation from the Welsh Government of some R&D support currently in a few areas in relation to wind, for example, offshore wind. These things are all really, really important as seeds to grow those great oaks, and continuing that and focusing on that and having a very clear research and innovation strategy is really important. There are goals that have been set out that bring clusters of industries together, particularly into the south Wales corridor where we've got most of our steelworks. I think keeping and driving those forward helps to make sure that we've got a future, that we're actually producing steel for a purpose and it's part of that future green economy or whatever other manufacturing economy we can pursue. So, I think getting a clear strategy and driving that forwards is absolutely critical.

And then, of course, the final piece there is around public procurement, and driving the right kind of policies and procurement policies, whether they be through direct procurement or indirect, where we're supporting industries, where we're putting government-level guarantees around wind returns or power generation returns. That's part of that government procurement process and we've got to be making sure that, if we're putting public money into those areas, we're getting the economic benefits back and the social benefits back to our people and the environments in which we work. So, driving that forwards I think has to also be part of the current and future Welsh Governments.

Thank you.

Thank you, gentlemen, for your evidence this morning. It'll greatly enhance our understanding and knowledge of the announcements that were made last week. A transcript will be sent over for you to have a look at. That'll form the official record of your evidence to this committee today. If you have any concerns, please liaise with the clerking team. But I thank you for coming in and giving us your thoughts. Thank you very much.

Thank you, Chair. Thank you, everyone. 

Thank you so much. 

I invite Members to note the committee papers to note. Are there any issues on the committee papers to note? No.

We'll move into private session. Can I have a motion to move into private session, please? We'll move into private session.