Pressure mounting on UK to tackle steel sector crisis

Pressure is mounting on the British government to take decisive and urgent action to support the domestic steel industry, in the wake of unprecedented pressure, which threatens jobs and the future of the industry.

Highlighting the scale of the crisis was news on Friday that SSI Redcar, the Teeside steel plant sold by Tata Steel in 2011, would be suspending production in the face of falling steel prices.

In the last two months, Tata Steel announced the mothballing of its strip products business in Llanwern in Wales, and warned that up to 720 jobs could go at its specialty and bar business division.

In August, the Klesch Group pulled out of plans to buy Tata Steel’s long products division, citing a lack of a comprehensive strategy from the government to tackle the sector’s challenges. 

Following a three-hour debate in the House of Commons on Thursday, Anna Soubry, Minister for Small Business, Industry and Enterprise, pledged to hold an urgent summit to discuss the challenges facing the industry.

However, the industry, parliamentarians and unions, while welcoming the opportunity for further discussion, insist that urgent practical action is needed.

“We need help and support from the government right now. We don’t have the time for these discussions to take place…there are very significant issues across the steel industry,” Roy Rickhuss, General Secretary of the Community union, told BusinessLine .

The union is calling for urgent assistance to be provided to SSI and its workers. 

“It’s an unsustainable situation,” says Gareth Space, Director of industry body UK Steel.

“If things don’t happen now we will have a very different sector in five years time, a much smaller industry.”

 In a show of unity rarely seen in British politics, industry, unions and backbench parliamentarians from the Conservatives, Labour and the Scottish National Party, have pointed to the huge pressures on the industry including an unfavourable exchange rate, and poor demand in Europe, which remains 25 per cent off pre-2008 levels.

They have also pointed to factors where government policy could make a difference, including greater support for anti-dumping measures at a European level. Europe has introduced duties on certain categories of steel from some countries, including China, but they argue that more could be done by the UK to champion this approach and across products, pointing to the success of the US’s efforts in heading off the dumping of steel produce in their market.

The proportion of Chinese steel in the UK has quadrupled in four years, presenting a huge challenge to the industry as it hits prices, which have collapsed from £318 per tonne to £191 per tonne, according to Labour MP Anna Turley, who introduced the debate in the House of Commons.

“Tata Steel has invested almost £1.5 billion in its UK operations since it acquired the business but we're being harmed by unfairly-traded imports, made worse by an uncompetitively-strong pound,” said a Tata Steel spokesperson.

“Our whole industry is looking to the European Commission to take urgent action to tackle unfairly-traded imports."

Industry and politicians also point to the time being taken to introduce financial compensation for the energy costs of energy-intensive users (including the steel industry) in the UK.

It is set to take effect from April 2016 only, but the industry argues much more urgent action is needed.  

Energy costs in the UK are estimated to be roughly 50 per cent higher than in Germany, the biggest European competitor.

They are also calling for an urgent review of the business rates — a tax on business property — for capital-intensive firms, that pay up to 10 times more than their European competitors for such taxes and are penalised for making investments into machinery and plants.

One MP pointed to the example of Tata Steel, which after investing £185 million in a new blast furnace in Port Talbot faced a rise in business rates of £400,000 a year. 

“Penalising investment like this is detrimental to British industry,” said the MP Tom Pursglove.

 Soubry, the minister, who said she believed there was a case for government intervention in the market in certain circumstances, said she would be raising the dumping issue with the Chinese government during a visit to that country next week.

However, giving a steel maker such as SSI assistance to restructure would break the EU’s strict state aid rules, while the problems of high energy costs had to be balanced against the need for a cleaner, greener environment.

She pointed to Treasury plans to review business rates, but stressed that changes would have to be fiscally neutral.