BDC Magazine - Online version December 2015 Issue - 216 | Page 69

BCSA.qxp_feature 2 21/10/2015 12:07 Page 67

Britain's steel
industry:
What's going wrong?

I

n the past few weeks, one part of the UK economy

have increased dramatically. In 2014 the UK imported

- the steel industry - has been grabbing the news

687,000 tonnes of steel from China compared to 303,000

headlines, but for all the wrong reasons.

tonnes the year before.

First, Thailand's SSI announced it was closing

It is true that the UK's steel imports from the rest of the

down its Redcar works with the loss of 2,200 jobs,

EU are much higher - 4.7 million tonnes in 2014, but crucial-

then parts of Caparo Industries' steel operations went into

ly China is selling its steel at much lower prices. According

administration putting 1,700 jobs potentially at risk. Now

to Eurostat, the EU's statistics agency, EU steel imports into

India's Tata Steel has announced nearly 1,200 job losses at its

the UK cost on average 897 euros a tonne in 2014, while

plants in Scunthorpe and Lanarkshire.

Chinese steel imports were just 583 euros a tonne - leading to

The steel industry says it has been hit by a combination of

accusations that it is selling at unfairly low prices.

factors: the strength of the pound, relatively high electricity

High energy costs for energy-intensive businesses like

prices, the extra cost of climate change policies, and compe-

steel production are also a factor, says the industry, added

tition from China - there have been allegations that Chinese

to by the extra cost of climate change policies. UK Steel,

steel is being sold in the UK at unrealistically low prices.

the industry body, says government policies to compen-

So what's the truth of it all - just why are significant parts
of Britain's steel industry in such trouble? Demand for steel

sate steel companies for these extra costs have been coming in too slowly.

worldwide has not returned to pre-financial crash levels.

The government held a steel summit last Friday in

With economies - particularly China's - still seeing weak

Rotherham, and Business Secretary Sajid Javid said it was

growth, global demand for steel is set to remain sluggish,

committed to, "Working closely with industry on both short-

falling by 1.7% in 2015 and rising by 0.7% in 2016.

term and long-term issues."

A strengthening pound has been one of the factors mak-

The industry itself is clear what it needs. UK steelmakers

ing UK steel expensive on the international markets. Earlier

want lower business rates, a relaxation of carbon emissions

this summer sterling reached a seven-year high against a bas-

targets for heavy manufacturers, more compensation for high

ket of currencies, after the Bank of England Governor Mark

energy prices, and a commitment that British steel is used in

Carney signalled the first rise in interest rates since the crash

major construction projects.

could come by the year's end.

Gareth Stace, director of UK Steel, says the sector needs:

At the same time, global steel prices have halved in the

"A clear and unambiguous commitment to fully implement

past year. Meanwhile, China's own economic slowdown has

the energy intensive industries compensation package, which

led Chinese producers to seek export markets as their home

will go some way to rebalancing the crippling costs of elec-

demand has stalled. As a result, UK imports of Chinese steel

tricity for British steel making firms."