Britain’s industrial policy came under scrutiny as the Klesch Group said it was nixing its plan to acquire Tata Steel’s European long products division, pointing to a lack of a comprehensive strategy to tackle domestic and international competition issues facing steel makers.

Just last October Tata Steel announced signing a memorandum of understanding over a potential sale with Klesch for the long division, as part of a strategy to focus on being a strip steel player.

The long products division, which caters to a number of industries, including construction, employs around 6,500 people, with the vast majority based at Tata Steel’s Scunthorpe operations. The division produces around 3 million tonnes of steel annually, with two of its four blast furnaces at Scunthorpe in operation.

“The Klesch Group confirms that it is no longer in talks with Tata Steel to purchase its Long Products Europe business and associated distribution activities,” the company said in an emailed statement.

CEO Greg Klesch told the Financial Times that the group was walking away from the deal. “What is the industrial policy when it comes to energy or when it comes to the dumping of Chinese steel?”

Tata Steel has long raised the issue of UK energy costs — which are higher than most of the rest of Europe. While the government has pledged relief from energy levies for industries that use energy intensively, those measures are yet to kick in.

Meanwhile, European legislators have begun to tackle the issue of dumping (often at prices well below European manufacturing costs) by reintroducing temporary duties on certain types of steel products, though the industry has been pushing for a more comprehensive and permanent solution across products.

The EU is the world’s second-largest producer of steel after China, producing 11 per cent of global output, according to European Commission figures. However, despite a recovery in demand and an action plan for competitiveness brought in by the EU two years ago, demand remains nearly 30 per cent below pre-crisis levels.

“In this context, it is clear that further support from the government is needed so the UK steel industry can be competitive in a global market,” said Roy Rickhuss, General Secretary of the Community Union.

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