With the increase in new metals, steelmakers are having to bite back.
South Yorkshire is well known as the birthplace of stainless steel, Benjamin Huntsman’s crucible steelmaking process and the Bessemer process, as well as stainless silver more recently. From this base the subregion has moved into titanium and nickel alloys, and is the UK’s centre for materials and metals technology.
Fifty to 55 per cent of all advanced engineering and manufacturing (AEM) businesses in Yorkshire are based in South Yorkshire, says Alan Partridge, chief executive of the National Metals Technology Centre (NAMTEC), with 30 per cent in West Yorkshire and the balance spread across the Humber and North Yorkshire.
Although a study is under way to update the current statistics, in 2002 there were 5,000 AEM companies in Yorkshire, employing 120,000 people. At this time the sector contributed about £5bn to Yorkshire’s Gross Value Added (GVA).
Partridge says he expects the study to reflect the general economic trend of an overall reduction in employment in manufacturing coupled with a steady rise in productivity. The employment levels associated with traditional volume steelmaking have continued to fall, even this year with Corus announcing 2,500 redundancies in the UK in January. And Yorkshire’s metals businesses have had to create an edge by adding value to their products and services because they can no longer compete on price with the cheaper Eastern rivals.
Partridge says different metals are coming onto the scene as part of this move up the value chain, but steel still has its place. This change has been driven by market demand for better performance from materials in different conditions.
“We have seen a response from the steel industry, which is developing lighter steels to cover that ground lost to nickel and titanium, because there is a price benefit with many of the steel products. Nickel and titanium are incredibly expensive,” he says.
But the developments being made in the county are creating opportunities for the usage of these metals as research and development enables them to be used more efficiently. Companies such as The Castings Technology Institute are leading in titanium casting technology by making 1mm thick titanium castings, and the Advanced Manufacturing Research Centre is machining metal at speeds nobody envisaged five years ago.
The special metals sector has been hit hard by recession. John Warner, partner at Sheffield accountancy firm Barber Harrison Platt, says: “The sector suddenly got hit mid-October and early November because of the effects of commodity prices falling through the floor. Prices have risen slightly since the end of September, but nobody can predict where they’re going to go.”
The situation hasn’t been helped by the credit crunch either. Richard Wright, Yorkshire Forward’s AEM sector champion, says special metals businesses have seen unilateral changes in their credit offers. “Banks want more personal cover for any loan the business wants, and we’re also seeing a big tightening in insurance of shipments and credit insurance,” he says.
This is a frustration for John Dunkley, owner of Atomising Systems. He has had to use personal funds and personal guarantees despite the fact that the business seems to tick all the right boxes and is profitable.
“Everyone tells us we tick all the boxes because we have 80 to 90 per cent export rates and are a high-tech company with value-added products,” he says. “But for the banks, a debtor book of export is worthless, and as the technology is so specialised they couldn’t sell it on the open market. When we build a special piece of equipment it gives us a huge market advantage but no-one else can use it so as security it’s valueless.”
Businesses supplying the automotive sector are in trouble but not everyone is suffering. The region also supplies the oil and gas, defence, healthcare and environmental technologies sectors, and companies do still have strong order books.
Wright says companies need to move up the product chain because the region’s edge will not be price: “Those in the best position have done the right thing over the past few years by moving up the value chain and selling on high-tech and value-added products. We push this agenda because people have got to prepare for the upturn.”
Innovation is about looking at the future. What will the world’s customers want to buy five to 20 years from now? And which products won’t they be buying in 20 years?
Wright cites the aerospace industry, which is under pressure to be environmentally friendly. Rolls-Royce is developing its engines to work at higher temperatures, which would make them more efficient. But the materials used in aircraft engines will not operate 100 degrees hotter so, with researchers developing materials that will, those companies supplying products into the current engine will need to replace that business in 20 years.
The two biggest opportunities for the special metals sector are power generation and green technologies. Different conditions in the future in power generation will require different materials, says Wright: “If you want to put biofuel into a power station, the combustion environment is completely different than if you use coal or gas. If you have a wind farm out at sea, you can’t afford to have the problems they have with gear boxes. Offshore wind farms are so much bigger than on land so they are much harder to change. There are massive issues about reliability and life-proofing, and as such they require more technological solutions.”
Chris Middleton, managing director of Ejot, whose newest product developments have been driven by energy efficiency, says legislation should be seen as an opportunity for Yorkshire businesses in the metals sector.
“Energy is a commodity we’ll be short of in the future so we’ll see a shift in the next five to ten years to more renewables. I think legislation and technology change is a great opportunity. People are going to be required to have solar panels on their roofs and wind turbines in their gardens. Innovation is not just about products but spotting the opportunities and trends, and having the foresight and desire to be ahead of the game.”
A workforce for 2020
A government review undertaken a year ago – before the full impact of the recession was clear – identified skills as the biggest issue for manufacturing companies.
Alan Partridge, chief executive of NAMTEC, says skills are always high on the agenda for the Special Metals Forum, a formal membership organisation managed by NAMTEC. There is a difficulty recruiting graduates with the right qualifications, he says, but there is a big focus, too, on how companies develop their people once in employment.
Statistics indicate that the skilled workforce needed by 2020 is not something companies will be able to buy in, and 75 per cent of the 2020 workforce already work for those companies. “The question is how do we develop those people because you can’t just recruit in as a solution,” says Partridge.
NAMTEC helps companies develop their existing employees’ technical skills as well as attracting new blood into the industry. It runs a schools engagement programme to alert children to opportunities in the sector – an agenda that is extended to parents who “still don’t see manufacturing as a career for the future”. NAMTEC also runs a graduate placement scheme with the universities, which will this year place 40 students into businesses.
There are lots of mechanisms for obtaining skills training but the devices you use to access them makes it complicated, according to John Cowling, partner at PricewaterhouseCoopers in Sheffield. “There are a lot of different providers so we need a one-stop shop,” he says.
The organisation has realised this and now coordinates the graduate placements, helping companies access funding, find a suitable, high-value project for the student to work on, interview the students and support them throughout the placement.
“Many small companies don’t have the resource or time to look beyond what they’re doing to see what’s coming out of the universities and what their competitors are doing,” says Partridge.
Also in: March 2009
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