UK steel sector’s demise speeds up
The UK’s steel industry has been roiled by the slowest economic growth since 1990 in China, the biggest consumer.
|||London - The UK’s steel industry has been in decline for decades. Companies that held out are now under more pressure from record Chinese exports, a stronger pound and weaker demand.
The squeeze is forcing more plants to close or reduce jobs. Tata Steel, the U.K.’s biggest producer, announced 1 200 job cuts Tuesday and said it plans to stop producing steel plate at plants. On Monday, 16 companies that comprise Caparo Industries, owned by Swraj Paul, a member of the UK’s House of Lords, were placed into administration.
The steel industry has been roiled by the slowest economic growth since 1990 in China, the biggest consumer. European mills are also battling a flood of cheap exports from the Asian country, producer of about half the world’s steel, as its own producers ship cheap metal overseas. In the UK, the pound’s 19 percent advance against the euro since early 2013 has made steelmakers less competitive.
"The UK steel industry is struggling for survival in the face of extremely challenging market conditions,” Karl Koehler, chief executive officer of Tata Steel’s European operations, said in a statement Tuesday. "Inaction threatens the future of the entire European steel industry.”
Tata said it will stop production of steel plates at plants in Scunthorpe and Scotland due to a flood of cheap imports from China. The company called on the European Commission to tackle what it called unfairly-traded imports.
China has shipped unprecedented volumes this year as domestic demand slowed. While the exports have enabled the nation’s mills to them to sustain production, they’ve spurred a surge in trade tensions in Europe and the US amid complaints that the exports are unfair.
The collapse of Caparo’s steel business follows the closure of the the Redcar plant last week after the UK’s Insolvency Service failed to find a buyer. PricewaterhouseCoopers, the administrator for Caparo, said it’s assessing opportunities to restructure or sell the businesses and their assets.
“The impact of steel prices and exchange rates has had an impact,’’ Matt Hammond, lead administrator for Caparo and a partner at PwC, said in a statement. “This is a significant business with a wide range of interests across steel, engineering, vehicles products and technologies. Its scale and reach into significant customers and its importance to suppliers cannot be understated.”
The World Steel Association last week cut its outlook for global demand for the material this year as China’s slowdown curbs consumption. World usage will contract by 1.7 percent to 1.513 billion metric tons. Chinese steel demand will fall 3.5 percent to 685.9 million tons this year, the first decline since 1995. The UK produced less than 12 million tons in 2013.
Steel production at Redcar, owned by Thailand’s Sahaviriya Steel Industries Pcl and which employed about 2 000 people, halted last month as prices for the metal it produced slumped. The company bought the site, which includes coke ovens, power generation facilities and the Redcar blast furnace, in 2011 from Tata Steel.
BLOOMBERG