It’s been revealed today that global steelmaking giant Corus is to cut 3,500 jobs worldwide, as the company witnesses a substantial decline in demand from the ever-deepening downturn in the global economy.

As a subsidiary of India’s Tata Steel, Corus employs around 42,000 people worldwide and 24,000 of these are employed in the UK alone. On a day when the company announced the loss of 2,500 jobs in the UK, it’s perhaps worth pondering how the gases industry might eventually suffer from a decline in steel production.

The announcement is just the latest in a long line of negative news from manufacturing companies the world over.

Corporations and industries around the world are suffering as a result of the global economic downturn, with a chain reaction spreading through industry. With industrial, medical and specialty gases prevalent throughout almost all applications and walks of life, it’s not inconceivable to expect the gases business to begin to suffer further down the line.

The question is – how much, when and where?

If daily reports of company collapses and cost-cutting are to be believed, we should perhaps be worried. Manufacturing output is known to have dropped in recent months, while both the vehicle and metals industries thought to be among the worst hit industries as a result of the crisp, credit-crippling winter months.

Among the casualties, November (2008) saw US car maker Ford announce job cuts having posted third quarter losses, while Japanese car group Toyota shocked analysts by revealing lower than expected quarterly profits and slashing its earnings forecast for 2008.

Weeks later and the downturn in the German vehicle market had been described as being ‘at a pace and magnitude that has never happened before’. New car sales in 2009 are expected to be the worst since the reunification of West and East Germany in 1990, according to the German Association of the Automotive Industry.

Elsewhere, and in other industries the outlook is just as bleak. Industries as diverse as pottery and plastics have failed to escape the slump.

The International Monetary Fund (IMF) has grown gloomier about prospects for world economies in recent months, previously predicting developed economies to shrink as much as 0.3%. Forecasts have also weakened for emerging economies such as China, India and Russia, while the IMF has also slashed its growth expectations for the overall global economy in 2009.

The global economy is still expected to grow in 2009, but only by 2.2% compared to a previous forecast of 3%.

Of some of the key industries affected, perhaps one of those most intrinsically linked to the industrial gas business is that of the steel trade, hence the concern for this latest news from Corus.

Macabre metals market
Metallurgy seems to be struggling since the onset of the financial crisis, with a series of alarming news releases from some of the biggest companies across the globe.

In recent months, mining firm Rio Tinto had become the latest major global group to declare huge job losses. Rio Tinto is the world’s third largest mining firm, but still suffered at the hands of the trading tumble and announced it would be cutting 14,000 jobs as part of debt reduction plans.

Before that, the world’s largest steelmaker said it would be cutting output in the fourth quarter of 2008. ArcelorMittal indicated growth plans were on hold and its output would be cut by 30% in the quarter, as demand for steel from the construction and car sectors declines.

Norwegian aluminium group Norsk Hydro ASA meanwhile, noted that it would be reducing production at its aluminium plant in Karmoy, Norway.

So now it is Corus that reveals restructuring actions in the wake of the deepening downturn.

Announcing the job cuts, Corus declared that it would be mothballing a facility at Llanwern near Newport in South Wales, and trying to sell a majority stake in its Teesside site. A 40% fall in global demand for steel from its peak of last year, caused Corus’ order book to drop by more than a third – while steel prices have fallen by a half since last September.

Time to worry?
So far there appears to have been mixed views among many in the gases business, as to whether our industry will come under slight threat from the economic woes and their chain reaction.

gasworld can report that a mixture of optimism and realistic caution seemed to be in the air among delegates at the recent South & Central American Conference in Chile, though key industry figures were keen to encourage a positive attitude.

So is it now time to worry? The general expectation appears to be that there will be a difficult opening couple of quarters in 2009, but that towards the end of the year the recovery should be underway.

Urging optimism, Spiritus Consulting’s Managing Director John Raquet said at the recent gasworld conference, “It’s going to be tough, it’s going to be difficult but our industry will still grow. Let’s not forget it is a capital intensive business, and I’ve not heard any companies saying they cannot find investment for projects.”

A cautious eye is perhaps to be expected however, in light of recent news, and a tough time it is sure to be.

Oxygen is an essential product in the process of steel production, used as a reactant or combustant and now applied in an increasing number of processes.

So fundamental is this industrial gas to the steel sector, that supplying the ferrous metals industry generates a substantial proportion of the major gas suppliers’ revenues. As recently as early 2008 for example, Praxair had attributed 17% of its sales revenues to the metals industry – second only to manufacturing’s 22% share.

Today’s announcement from Corus is further evidence of the economic downturn hitting manufacturing in the UK and worldwide.

With industrial gas consumption so intrinsically linked to manufacturing output and almost all industry sectors, it is perhaps to be expected that a prolonged fall in demand is to be expected over the next few months.