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DOCUMENTS "COM"
COM(79)597
Vol.1979/0205

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COMMISSION
OFTHE
EUROPEANCOMMUNITIES
GeneralSecretariatCOM(79)597 final
Brussels,5thNovember1979
FOROFFICIAL USEONLY
REQUESTFORASSENT,PURSUANT TOARTICLE56.2aOFTHE
ECSCTREATYTOGRANTING ARECONVERSION LOANTO
"NATURAL GASTUBESLIMITED"(UNITEDKINGDOM)
(Communication fromtheCommission totheCouncil)
COM(79)597final

COMMISSION
OFTHE
EUROPEANCOMMUNITIES
INTERNAL DOCUMENT
COMMUNICATION TOTHECOUNCIL
Subject:Requestforassent,pursuanttoArticle56.2aoftheECSC
Treatytogranting areconversion loantoNaturalGasTubes
Limited(UnitedKingdom).
I.ESSENTIAL INFORMATION
Applicant
Beneficiary
Project
Location
Investment
Loanrequested
Jobscreated
Interestreduction:NaturalGasTubesLtd.
:NaturalGasTubesLtd.
:Expansionofcapacityformanufacturing
ERWtubes(newsmallERWmilland
extensiontotheexistingfactory)
:Tafarnaubach ,EbbwVale.SouthWales
:t1,290,000
:t645,000(+1,029,000 EUA)
:60
:30,870EUAperyearforfiveyears.
H.CONFORMITY WITHARTICLE56OFTHEECSCTREATY
TheprojectislocatedatTredegarintheEbbwValeTraveltoWorkAreawhich
iscoterminous withtheBlaenauGwentDistrict.ThewholeofBlaenauGwentis
aSpecialDevelopment AreaforthepurposesofUnitedKingdomregionalpolicy/
andaNationalPriorityAreafortheEuropeanDevelopment Fund.Ithasbeen
traditionally dependentuponcoalandsteelanddespitethedeclineover
recentyearssteelandcoalaccountedforoveronethirdofthetotal
employmentin1976.Recently,steelmakingatEbbwValehasbeendiscontinued
andtheclosureoftheheavyendoftheEbbwValesteelplanthasledtoavery
substantial lossofjobsinthearea.
./.
Provisionaloddress:RuedelaLoi200.B–1040Brussels–Téléphoné350040-358040–Télégraphieaddress:«COMEURBrusselst–
Telex:.COMEURBRU 21877.

-2-
Latestavailablefiguresshowthattheunemployment rateforBlaenauGwent
is11.4%.Thesefiguresareconsiderably higherthantheWalesrateat7.3%.
Thepatternofunemploymentfortheareahasbeenconsistentlyhigherespe­
ciallyamongmalesthantherateforWalesandthepriorityistoreducethe
rateofunemployment andtoprovidenewopportunities forincreasesin
activityrates.Thisnewprojectisexpectedtomakeausefulthoughsmall
contribution toachievingthisobjective.
III.THEUNDERTAKING
Description
Legalstatus
Established:NaturalGasTubesLimited
:LimitedLiabilityCompany
:1966
Registeredcapital
Natureofbusinessb1,010,000
Manufacturers ofERWandSpiralWeldTubesat
Tafarnaubach (S.Wales)andHuntington
PreviousECSCloans:b950,000in1976
b136,000in1976
ParentCompany :CaparoGroupLtd.
TheapplicantisamongthefirmswhichhavemovedtoTafarnaubach Industrial
EstatetoutilisepartoftheworkforcebeingmaderedundantbytheBSC
closuresatEbbwVale.
In1976theCommunitygrantedaloanofb950,000toenableNGTtobuildanew
factoryandtubemillwhichwouldprovide120newjobs.Thenewmillmade
longitudinally weldedtubesbytheelectricresistanceweldmethod(ERW)in
thesizerange60.3mm-193.7mm0D,togetherwitharangeofsquare,
rectangular andcircularstructuralhollowsections.TheERWmillcommenced
salesinApriI1977.
Alsoin1976theCommunitygrantedaloanofb136,000towardsthepurchase
ofanew250mmto1270mmO.D.SpiralWeldMilltobeinstalledatthe
existingfactory.Theemploymenteffectofthisprojectwas18newjobs.The
newspiralmillwascommissioned inNovember1978andcommenceddeliveries
inFebruary1979.
NGTisnowplanningtoexpanditscapacityformanufacturing ERWtubesby
installing anewsmallERWtubesmillandextendingtheexistingfactoryto
provideforadditionalstoragespace.Theexpansionwillresultinthe
creationofanestimatednumberof21jobsinthefirstyearrisingto60jobs
after3years.
IV.THEPROJECT
Theprojectplansprovidefor:
(1)Anextensionof54,000sq.ft.totheexisting100,000sq.ft.factory.The
newspacewillbeusedforstorageofERWtubesandhollowsectionsfrom
boththeoldandthenewERWmill.
(2)AnewERWtubesmillwhichwillproducecircular,squareandrectangular
ho'lowsectionsfromsteelgrade43cforuseinthestructuralsteelmarket

Circular SquareandRectangular
21.3mmO.D.to76.1mmO.D.20x20mmto60x60mm
HaltThickness
1„3mmto4.2mm.
Thenewmillwillalsoproducepressuretubeinthediameterrange
21.3mmto76.1mm,principallyinthebasiccommercialgradeknown
as"gaslist"tospecification BS1387.Thesetubeswillbemainly
soldwithplainendsinself-colourorvarnishedfinishbutNGTdoes
havearrangements withoutsidesubcontractors tosupplygalvanised
finishifnecessary.Asmallamountofgaslisttubeswillbe
suppliedwithscrewedends.Gaslisttubesareusedforlowpressure
transportofair,steam,gasandwaterandalsoforlightstructural
steelpurposessuchasharvdrailing andfencing.
Thetheoreticalcapacityofthenewmillonathreeshiftbasiswith
anaverageproductrangeisabout18,000tonnesp.a.butNGTisunlikely
toreachthislevelofoutputuntilatleastthethirdyear.The
productionlevelsbasedonthesalesforecastsare:
Tonnesp.a.
1980 1981 1982
Hollowsections 3,000 7,000 10,000
BS1387GasList3,000 5,000 8,000
6,000 12,000 18,000
Theestimatedcapitalcosttotal* b1,290,000
BuiIdings b426,000
Plantandmachinery b754.000
Other b110,000
Thenewmillwilloccupyspacewhichispresentlyusedforstorage
offinishedtubesfromtheexistingERWmill.Thisnecessitates the
buildingofextraareassincetheholdingoffinishedtubestockis
regarded:asanimportantsellingfactor.
THEMARKET
1.Hollow_Sections
NGThasestablished areasonablesalesbasewith1978salesofsquare,
rectangular andcircularhollowsectionstotalling6.500tonnes.
Thereareopportunities forNGTtosellsubstantially moreofthese
productsprovidedthepresentsizerangeisexpandeddownwardsas
planned.NGTsalesaredividedbetweenend-users (structuralengineers,
plantandmachinerymanufacturers,lightingcolumnmanufacturers,etc.)
andstockholders .

NGT'sownassessmentofmarketsizeis150-150/200,000tonnesp.a.,
themajorpartofwhichissoldbytheBSCtubesdivision.However,
asignificant andgrowingtonnageisconsistantly wonbyimporters
whoareselling"cold-finished "sectionsintotheUKasfollows:
1978(toNovember)1977 1976
Annualtonnagebased
onaveragemonthly 42,000 36,00031,600
imports
NGTcanbecompetitiveinpriceandqualitywiththeseimportsbut
theyaregenerallysoldtostockholders whowishtobuyacomplete
rangeofsizesandnotjustthepresenthighlyrestrictedsizes
offeredbyNGT.
NGThashadgoodindicationsthatthestockholders whoarealready
supportingitwillmorereadilyabandontheirimportsofhollow
sectionsonceNGTcangivethemafullrange.InadditionNGTwill,
ifnecessary,makespecialeffortstoattractandgaineitheras
directcustomersorthroughpreferredstockholders thelargerend-
userswhopresentlybuyimportedsections.
2.BS1387Gas_List
Theproposedextensionintothesmallersizeshasbeenwelcomedby
theexistingcustomersandwillalsoopentoNGTanewrangeof
customerswhosepurchasesarepredominantly intheunder60.3mmsizes
orwhohavebeenreluctanttobuyfromNGTuntilitcanofferafuller
rangeofsizes.
UntilNGTenteredthemarketin1977,BSCwastheonlyUKproducer
ofgastlisttube.Ashasbeendemonstrated inotherareasofBSC's
business,theUKsteelpurchasers donotwanttobeentirelyinthe
handsofonesupplierandthushaveanaturaltendencytoimportif
thereisnoalternative UKsupplier.Thelatestimportfigures
availableshowthatin1978importsofgaslisttubewererunningat
about7,500tonnesp.a.,mostofwhichisbelievedtobeinthesmaller
sizerange.NGTisconfidentitcouldobtainaconsiderable shareof
thisimportedgaslisttube.
SOCIALCONSIDERATIONS
Theadditionalemploymentcreatedisforecastasfollows

-5-
Periodafter 1year 2years 3years
commissioning 31/12/8031712/81 31/12/82
Basisofoperation 1Shift 2Shifts 3Shifts
Sales&Administration 2 3 4
Foremen 2 3 4
Operators &General ^^^
Labour
21 40 60
NGThasenjoyedexcellentlabourrelationswithallitsemployees
andtheISTCUnion.Theproposedexpansioniswarmlywelcomedby
them.
InrecruitingtherequiredworkforceNGTwillgiveprioritytoworkers
shedbyBSCatEbbwVale.Aretrainingprogrammeisbeingdiscussed
withBSCandthelocaltrainingandskill-centre,oftheManpower
ServiceCommission.
VII.FINANCING
Thetotalfinancerequiredis:
b
Capitalexpenditure 1,290,000
Workingcapital 474.000
Thesourcesoffinanceenvisagedare:
Equitycapital
Regionaldevelopmentgrant
Leasing
CashFlow
ECSCloan
1-764,0001,764,000
282,000
207,000
350^000
280,000
645.000

-6-
CaparoGroupLtd.,theparentcompanyofNGTispreparedtosubscribe
b282.000incashfortheissueofnewOrdinarySharesatpar.
Thesubscription couldtakeplaceattbeendoftheyeartomeetpre­
liminarypaymentsforplant,etc*
VIII.CONCLUSION
TheCommissionconsidersthattherequestcomplieswithArticle56.2a)
oftheECSCTreatyandthattheproposedinvestmentiseconomically
sound.Inconsequence,theCommissionhasapprovedaloanto
NaturalGasTubesLimitedforitsprojectatTafarnaubach Industrial
EstateinGwent,SouthWalesforamaximumamountofb645.000
(+1,029,000 EUA)oritsequivalentamount.Interestistobereduced
by30,870EUAperyearforthefirstfiveyearsafterthepaymentor
paymentsoftheloan.
TheCommissioninvitestheCounciltogiveitsassenttotheforegoing
decision.