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Thursday, 11 July, 2002, 18:46 GMT 19:46 UK
Q&A: Allied Steel and Wire collapse
BBC Wales business and industry correspondent Miles Fletcher explains why the UK's second-largest steel firm fell into receivership, risking 1,300 steelworkers' jobs at Cardiff, Sheerness and Belfast.

What caused Allied Steel and Wire's collapse?

Like the rest of the steel industry, and most manufacturing firms as well for that matter, ASW has had a tough time from the strength of the pound against the euro.

Around half the company's output of steel rod and bars has traditionally gone to countries which are now within the eurozone.

It's a very competitive market and ASW's prices has been driven downwards by the competition.

Basic steel products like this are increasingly being produced in low wage economies such as those of Eastern Europe and South Asia.

Commercial

In Cardiff , where the company's two major plants are located, ASW has had to foot a £1m annual bill for local council rates (taxation), for example.

Large numbers of workers also earn in excess of £20,000 a year.

Costs like this are much higher than they would be for some of ASW's commercial rivals overseas.

However, ASW has endured these adverse condition for some years and recently an upturn in steel prices recently suggested the worst was over and profit margins would improve.

Unfortunately, it seems the company's bankers could not see a viable long term future for the business .

We also understand there was a dispute between certain financial institutions about rights to various assets of ASW in the event of insolvency.

Failure to resolve that matter it seems was the final straw that broke ASW.

Are US export tariffs and the high pound to blame?

Much has been been made of President Bush's decision to impose those tariffs and the issue was seized on by Labour MP Derek Wyatt when he questioned the Prime Minister about ASW in the Commons.

To some on this side of the water it smacks of old fashioned protectionism and an "America first" economic policy.

ASW was concerned about the new tariffs, saying they would divert yet more cheap imports to Europe.

The company also acknowledged it was just one among many adverse factors it was facing.

Can politicians do anything to stop jobs being lost?

In Europe no government, whether national or regional, can extend subsidies, direct or indirect to the steel industry.

This is a long established rule under which the two main traditional industries of coal and steel and been subject to managed decline since the Second World War.

The politicians then can really on pick up the pieces after the collapse of a steel firm, helping with retraining initiatives and attracting new investment to the affected areas.

Could Allied Steel and Wire be sold as a going concern?

In theory yes, but a new owner would have to be very brave indeed given that state of the company's balance sheet.

At the time of writing it seems more likely that ASW will be broken up and its plants in Cardiff, Kent and Belfast sold to new owners .

They would therefore escape the old company's liabilities. Even so, steel plants in Wales would not appear very attractive at the moment, but everything can be sold at the right price.

It's been suggested that the Cardiff sites are worth more as development land.

They are both contaminated by decades of industrial use however, and the cost of remedying this may deter developers.

What is left of the Welsh steel industry and why is it disappearing?

Corus¿s Port Talbot works on the south Wales coast is the last big integrated works.

It's got its own deep water port for raw materials and employs well in excess of three thousand people.

Corus¿s other big Welsh plant at Lanwern, near Newport which used to be of similar stature has now been slimmed down and merely processes steel made elsewhere.

There are still a number of more specialised operations like the tinplate works at Trostre near Llanelli, Shotton on Deeside and the Orb works and Alpha Steel at Newport and Pontypool.

After the latest round of 3,000 Corus job losses the possible loss of another 1,000 at ASW would bring the total to approximately 6,000.

In the immediate post war years that figure was in excess of 100,000.


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10 Jul 02 | Wales
10 Jul 02 | Wales
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