The old debate we often return to, has surfaced again a propos of steel manufacturing. To what extent is self-sufficiency in strategic commodities and capabilities to be maintained? Procured? Or even desired? Some have strong inclinations to one extreme or the other, whatever the prevailing circumstances. I tend to say that there's no immutable answer, no formulaic way of "optimising". War and peace are critical input variables: but also the key given fixed externalities. China has no oil, as I once diplomatically reminded a Chinese commissar who had just scorned Europe's enthusiasm for electricity interconnection and stated that a nation should not rely on imports of such a vital resource.
In the here and now, I and many others would put primary steel manufacturing on the strategic side of the line. Clearly, Starmer has taken the same view at Scunthorpe (though curiously unmoved by Port Talbot, as the Welsh Nats bitterly remind him and indeed by Grangemouth / SNP), leading others to note that those vital "raw materials" we were all on the edge of our seats waiting for ten days ago, came from, errr, elsewhere (abroad).
Then comes Nils Pratley, extending the debate to gas storage and specifically, Centrica's huge offshore Rough storage facility. Pratley is usually quite sound, and here he sets out a reasonably balanced range of pros and cons.
Steel was a security risk. What about UK gas storage? The government refused to allow steel furnaces to be turned off. Should it be happy with just six days of stored gas?
So here we go again.
Nobody could disagree that now and for many years to come, gas ticks the 'strategic necessity' box. Since we ceased to be self-sufficient in natural gas in terms of production from our own territorial waters (the early 00's), without any government intervention or subsidy the miracles of the free market secured a healthily diverse range of import sources and facilities through which to convey them. How so? We've told this story before.
Because the decline of indigenous production could be, and was, seen coming a mile off, demand remained strong, and the companies involved were themselves strong, capable and confident. And that's where we are: able (as the energy crisis of 2021-3 showed) to withstand remarkable buffeting from the global market, and still keep homes warm. For sure, the cost of doing so [i.e. paying world prices] was to some extent socialised, but the means of doing so were free-market means.
And all this happened without Rough, which had been "permanently shut down" (© Centrica 2017 et seq) some years before as being uneconomic to its owners, the Tory government having more than once declined to bail them out. But lo! Miraculously, it transpired Rough had not been permanently shut down, but merely mothballed, and was rapidly pressed back into service by Centrica to avail itself of the profitable opportunities presented by Putin's gas crisis.
See, here's the problem in this very particular case: Centrica has form as a would-be subsidy-farmer. That's the trouble with going down the "strategic" road. Just like "green" or any other government-favoured enthusiasm, once the subsidies are spotted, every man-jack starts greenwashing / strategy-washing or whatever. It becomes very hard to disentangle what could be a respectable strategic case from their self-interested special-pleadings.
Even in 2025, with that recent crisis experience in hand, for all the ticks that natural gas puts in the 'strategic necessity' box, I'm not sure Centrica should be indulged.
ND
How can we be self-sufficient in steel if we import the iron ore and the coking coal?
ReplyDeleteAt least we've got our own limestone, I suppose. (Anyone like to confirm?)
Port Talbot used limestone from kilns near Shap, must have been quite expensive as IIRC gas-powered.
Deletehttps://solwayshorewalker.co.uk/2021/12/01/limestone-the-tata-shapfell-kilns/
Taxing the O&G companies until they leave the North Sea basin thus reducing tax revenue and bringing forward the decommissioning liabilities on UKGov is totally bonkers.
ReplyDeleteOT, but I see I'll no longer be able to file my micro-entity accounts with HMRC after March 2026, I'll HAVE to either pay an accountant or use commercial software. Is there any basic commercial software? Otherwise there's the option to file them online with HMRC in Welsh !
ReplyDeleteI stopped using my accountant as £500 for a couple of hours work was just too much .. took me half a day online.
ReplyDeleteInteresting idea 'Strategy'. The idea of long term aims or plans and/or a military context concerning operations and movements. The two often muddled up for political reasons.
ReplyDeleteWhat was disappointing was the childish brinkmanship over Scunthorpe. A bit of a waste to dump a perfectly functional steelworks and source of employment and economic activity over some unachievable political notions however noble and well meaning but muddled.
I see we are upping production of explosives - now that Ukraine looks like winding down. Begs a few questions over 'strategic' goals and a lot of other things. But however you cut the cookie exposives means nitrates and nitrates means oil/gas and lots of CO2. Brings to mind those old WW2 pictures of ladies on huge capstan lathes turning shell casings with a Woodbine dangling from lip. Makes a change from a bacon sarnie.
Maybe this place will return to its former glory. I believe the site still produces TNT and RDX.
Deletehttps://www.secretscotland.org.uk/index.php/Secrets/ICIArdeer
The last few times I have passed Shap all four kilns were down.
ReplyDeleteStill confused about coking coal - thought coke ovens at Scunthorpe were
shut down in February ? and that poor performance of blast furnace was attributed to poor quality imported Chinese coke .
If coal needed what about Whitehaven debacle?
Could not licence for the Yorkshire shale gas control price . That is if backstabber Miliband saw sense .
A bit O/T but a look at Bruce Schneir's security site might intrigue the tinfoil hat brigade. A study to automatically shut down AI systems that go rogue, chop the cables, flood the site etc etc. A system called Guillotine Hypervisor. Back to Quis Custodiet etc.
ReplyDeleteOnce you decide to go down the subsidy path, you’re effectively going back to “picking winners” as part of industrial policy.
ReplyDeleteEvery experience of this has shown governments are spectacularly bad at this. And it’s not like there’s not other options to Rough gas storage. Long duration energy storage (batteries and hydro pump storage?). Or why not (Heaven forbid) Drax II (4GW of “biomass”) and a two-year mountain of “sustainability sourced” cough “wood pellets”?
I jest a little of course but it’s a very valid topic for debates and should definitely be had before a penny is handed over to subsidy crack whore Centrica.
China, Japan, Korea never AFAIK went in for "picking winners", they went in for "picking industries", of which for Japan, shipbuilding, electronics and motorcycles were the first. They allowed cartels, who would share their R&D and that seems to be the way over there.
DeleteI was in Morocco a month ago, and the streets were full of Chinese motorcycles that I'd never heard of. Docker?
Works until it doesn’t. Germany followed this industrial policy which was a spectacular success but, like everything else, had natural limits. Some, like combustion engines, simply face declining demand. Others, like precision tools, are pretty much fully developed and descended into commodification. Design of complex assemblies and integration into finished products had seemingly uncopyable intellectual property but software defined manufacturing replaced individually connected and addressed modules.
DeleteJapan utterly dominated semiconductors but failed to innovate, especially in DUV, let alone extreme ultraviolet. And everyone figured out Total Quality Management. A tendency to “Galapagos products” sealed its fate in consumer electronics.
Both are being forced to reinvent themselves as industrial powerhouses. Japan is faring better than Germany, for the moment, but China is throwing money at its conglomerates and ending up doing predatory pricing as a result. But the debt burdens are colossal and absent s migration to a more consumption based internal economy, it’s at risk from debt-deflation. India (a perennial caterpillar always promising to turn into a butterfly; one day it will get there), Indonesia and the better-run parts of the Middle East are, to name but a few, always waiting to steal a march.
Shorter: no country, ev-ah, has managed to stay aloft through the magic of central planning indefinitely.
" indefinitely"
DeleteI guess it depends on your timescales. In the 70 years between 1955 and 2025 we've seen China go from centrally planned basket case (Mao) to centrally planned workshop of the world, while the UK has taken the opposite route. Running a mercantilist economy while persuading other countries you're embracing free markets seems to be the way to go.
Not a great sign for the future though. American tourists are a lot better tippers than Chinese ones.
Since 1955? Hardly. The Deng reforms from 1980 initiated the process which allowed China to shed the Mao-era basket-casedness (https://en.wikipedia.org/wiki/Reform_and_opening_up). 45 years is about how long it takes these mercantilism cycles to play out. Japan’s lasted roughly from 1945 to the end of the “bubble era” in 1990.
DeleteThey all end the same way. To paraphrase, “You can take our money (picture Donald Trump saying all this) and treat us like kings. Or you can treat us like shit and give us your money. But what you cannot do is both treat us like shit and take our money, too”.
Mercantilism is like open marriages. There are rules (or supposed to be) where both parties are allowed to have their little bits of fun, but within certain agreed, if flexible, boundaries. They rarely if ever work out. What happens instead is that, sooner or later, one or other (or both) parties start to break the rules. They may get attached to something despite the “no strings” restrictions and spend more and more time on them. Or they may involve friends which is supposed to be off-limits. Or they may tread on territory which is intended to be off-limits, like stepping out on family occasions like Christmas or birthdays. Or similar.
We could argue about who has been breaking “the rules”, was it China? Or America? Or both? But in the end, it doesn’t really matter, the arrangement which was previously enjoyed is over.
https://www.aspi.org.au/report/aspis-two-decade-critical-technology-tracker-the-rewards-of-long-term-research-investment/
Delete"These new results reveal the stunning shift in research leadership over the past two decades towards large economies in the Indo-Pacific, led by China’s exceptional gains. The US led in 60 of 64 technologies in the five years from 2003 to 2007, but in the most recent five years (2019–2023) is leading in seven. China led in just three of 64 technologies in 2003–20074 but is now the lead country in 57 of 64 technologies in 2019–2023, increasing its lead from our rankings last year (2018–2022), where it was leading in 52 technologies."
“ASPI was established by the Australian Government in 2001 and is partially funded by the Department of Defence with other sources of revenue including sponsorship, commissioned tasks and event registration fees.”
DeleteNow, what was that we were just saying about ostensibly independent organisations which are, rather, sucklers at the test of government largesse?
(nothing wrong of course either a rag bag of consultancies, defence contractors and the usual-suspect mega corporations enjoying their time on the government’s meal ticket, good luck to them is what I say, but it’s hardly surprising they churn out a “ooh! ooh! look! look! big scary China under the sofa comin’ ta get’cha, now gimme some dough to protect you from ‘em!” message)
As you say, Clive. And what's wrong with the very ample continental storage we access via the gas interconnectors? OK, I can answer my own question, but your point about valid debating topics is the correct one
ReplyDelete" And what's wrong with the very ample continental storage we access via the gas interconnectors? "
ReplyDeleteFine until there's some international crisis, and the interconnector gets turned off at the other end, because they want all the gas they can get for their own use.
I can never understand why people think that agreements between countries mean anything. As covid showed, when the SHTF all the fine words written down mean nothing. Naked self interest rules, and no-one cares about 'the law'.
Then ultimately, you’re looking at an entirely different set of resiliency requirements and solutions. However much has stored you have domestically, it’s got to be refilled from somewhere. If supplies are curtailed in summer when storage is refilled, you’ve got no storage.
DeleteIn which case, what you’d be far better doing is diesel generator backups at every substation serving a community of (say) 10,000 homes or more and a 30-day fuel supply. Cheap, robust, avoiding single points of failure and so long as you can get trucks onsite, can be refilled indefinitely.
This is, incidentally, more-or-less what Ukraine ended up doing, while undoubtedly there were some miserable times for the people there with electricity limited to maybe 10 hours a day in 3-4 hour blocks, that, with plentiful and virtually given away power packs for a few LED lights and a laptop or tablet, make life tolerable if not exactly luxurious. Russia spent by some estimates $5bn equivalent on missiles targeting energy infrastructure but, if the effect was to cause mass population dislocation, it wasn’t money well spent.
Last time I checked the North Sea was full of oil & gas. We even used to have refining capability close by on the pipelines back from the rigs. Just keeping all that infrastructure going would be a massive plus.
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