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CNA
3 days ago
- Business
- CNA
UK's steel industry struggles for survival despite tariff deal with US
LONDON: Two months ago, major steel producer British Steel nearly collapsed before it was taken over by the United Kingdom's government in a last-ditch effort to rescue the company. This came after the firm's Chinese owner Jingye Group announced that its two blast furnaces – the last of their kind in the UK – would close for good in the English industrial town of Scunthorpe, putting hundreds of jobs at risk. The government's move underscores the deepening strain on Britain's steel industry. It is grappling with global oversupply and uncertain trade conditions – particularly in its vital export market, the United States. America is the UK's second-largest steel export market, worth over 400 million pounds (US$540 million) a year. Despite the British government signing a trade deal with Washington last month that promised to bring tariffs down to zero, British steelmakers are still paying a 25 per cent levy on exports to the US. This rate will remain until at least Jul 9. The deal has temporarily spared the UK from the even steeper 50 per cent tariffs imposed on other nations, which kicked in on Wednesday (Jun 4). But industry players in Britain said they still face uncertainty. 'There is no end in sight of when those tariffs are going to be scrapped, because we still don't know the timetable, the criteria of getting that exemption, the hoops we need to jump through, and whether all steel producers in the UK will be exempt or not,' said Gareth Stace, director general of industry association UK Steel. PRODUCTION AT LOWEST LEVEL This uncertainty is particularly damaging for a sector already under huge strain. Many plants in England have not produced steel for nearly a year due to a lack of money to buy materials. UK steel production has fallen to its lowest level since the 1930s, prompting authorities to promise US$3.4 billion to help bridge the investment gap and turn the tide for the industry. However, additional billions of dollars in private funds are needed – a hard sell when the global trade regime has been changing radically from month to month. Meanwhile, cheaper steel from Asia, Europe and the US continues to flood the British market, where domestic producers now account for just 35 per cent of UK steel demand. Tom Evans, head of public affairs at UK's biggest steelmaker Tata Steel, told CNA that the overcapacity has become a perennial challenge for all stakeholders across the world. 'At the moment we've got an overcapacity of about 500 to 600 million tonnes … the UK makes around 6 to 7 million tonnes of steel a year. So we're a drop in the ocean in terms of global steelmaking,' he noted. 'But that kind of overcapacity means that the pricing (and) the trading conditions are really challenging for UK steel makers.' GOING GREEN Tata Steel has already shut down its blast furnace operations in the UK and ended production of virgin steel – the traditional method of turning iron ore into new metal. The company is now turning to electric arc furnaces, which melt down scrap steel to create new products using renewable electricity. That will help to meet government targets for a lower-carbon steel industry and construction company demand for 'greener steel'. 'We're quite fortunate in the UK (which) generates over 10 to 12 million tonnes of scrap a year. We want to keep some of that in the UK and remake that into steel,' Evans said. He added that the company needs 'a lot done in the next two years' to get its electric furnaces up and running. Electric arc furnaces can dramatically reduce the industry's carbon footprint. Recycling just one tonne of steel saves about 1.4 tonnes of iron ore and nearly a tonne of coal, according to British steel construction firm Elland Steel. The technology also allows producers to power their operations with wind, solar or other renewable sources. Like Tata, British Steel was offered hundreds of millions of dollars in government help to make the green transition, but its owner rejected the offer. The government's new ownership of British Steel has now reopened the possibility, though it is looking to find a buyer for the company in the long term. London is due to publish a 'steel strategy' in the coming months, recognising domestic production of steel as essential for economic independence and national security. But for now, the future of British Steel remains symbolic of the industry's broader challenge: Creating a viable, green and competitive steel industry while navigating a fast-changing world. 'What I want to see in the UK is a strong economy that needs a lot of steel - more steel than it needs at the moment – (and) that we are supplying the vast majority of that steel,' said UK Steel's Stace.
Sky News
6 days ago
- Business
- Sky News
Chinese group Jingye hires lawyers to recover British Steel cash
The Chinese owner of British Steel has hired a leading City law firm to explore the recovery of hundreds of millions of pounds it invested in the Scunthorpe-based company before the government seized control of its operations in April. Sky News has learnt that Jingye Group has appointed Linklaters - which advised it on its purchase of British Steel in 2020 - to evaluate legal options for recouping part of its outlay. It was unclear on Tuesday which potential routes Jingye was exploring with Linklaters, or whether a formal legal challenge to the government was under consideration. British Steel's balance sheet bears debts worth close to £1bn, most of which is said to be owed to Jingye in the form of inter-company loans. The Financial Times reported last month that ministers were exploring the controversial use of new legislation to wipe out those debts in order to smooth a path to the sale of the business. The government and Jingye had been at loggerheads for weeks over the future of the Scunthorpe plant's blast furnaces. Since Jonathan Reynolds, the business secretary, moved to commandeer control of the UK's second-biggest steel producer, the government has sourced additional supplies of raw materials to ensure the furnaces' continued operations. Jingye had been preparing to close them - with the loss of thousands of jobs - after seeking £1bn in state aid to facilitate the site's transition to greener steelmaking. Mr Reynolds has indicated that Jingye's shares in British Steel - which has not yet been formally nationalised - are worthless, and that the government does not intend to offer to pay to acquire them. A Jingye spokesperson said: "Jingye can confirm that Linklaters has been appointed; they were the original advisers on the acquisition in 2020." A spokesman for the Department for Business and Trade said: "We acted quickly to ensure the continued operations of the blast furnaces but recognise that securing British Steel's long-term future requires private sector investment. "We are working closely with Jingye and a range of third parties on options for the future, and we will continue work on determining the best long-term sustainable future for the site."
Bloomberg
09-05-2025
- Business
- Bloomberg
Trump's UK Steel Deal Could Target Chinese Ownership of Plants
The United States's offer to cut steel tariffs on the United Kingdom will only come into effect once the UK has met requirements relating to the ownership of certain plants, a condition that raises further doubts about the Chinese firm Jingye Group 's possession of British Steel. According to the text of the US-UK economic prosperity deal that was announced by President Donald Trump and Prime Minister Keir Starmer on Thursday, the US will offer an import quota on UK steel at reduced tariff rates once the United Kingdom meets unspecified requirements on supply-chain security and 'the nature of ownership of relevant production facilities'.
Reuters
07-05-2025
- Business
- Reuters
British Steel, under UK government control, to ramp up output, hire staff
LONDON, May 7 (Reuters) - British Steel said on Wednesday it would hire over 180 new staff as it prepares to ramp up production following the British government's operational seizure of the group from its Chinese owners in April. British Steel operates the country's last two remaining blast furnaces in Scunthorpe, eastern England. They have been running at a loss and came close to being shut down under plans announced in March by owners China's Jingye Group ( opens new tab. But following the government's intervention in April, British Steel said on Wednesday it would "significantly increase" iron and steel production in the coming months. As such it is recruiting for more than 180 new roles in engineering, manufacturing and business functions. The group employs 3,000 people, whose jobs were at risk under Jingye's closure plans. British Steel's interim chief executive Allan Bell said that with government backing, the company wanted to become one of the world's leading steel manufacturers. "To help achieve this, and meet customer demand, we will be upping production," he said in a statement. That demand is unlikely to be from the United States after President Donald Trump in March imposed a tariff of 25% on steel imports, in a blow for British Steel, which Jingye had warned was already losing 700,000 pounds ($922,000) a day. British Steel supplies the rail, construction, and automotive industries, but has struggled with high energy costs in the UK and a glut of steel in the global market. The government has previously said it is looking to bring in a private sector partner to secure British Steel's future. Meanwhile, Britain is trying to agree a trade deal with the U.S. which it hopes will reduce Trump's tariffs for its exporters, including British Steel.
The Guardian
18-04-2025
- Business
- The Guardian
British Steel on a razor's edge: inside Starmer's Scunthorpe rescue mission
By next weekend, a cargo ship carrying more than 50,000 tonnes of coking coal from Australia will dock at Immingham. In other circumstances, its arrival would be unremarkable. But the moment Navios Alegria reaches the Lincolnshire port will be the culmination of the government's high-wire act to keep the UK's last steel furnaces running. MPs were recalled from their Easter recess last Saturday to pass emergency legislation handing the government control over British Steel, which operates Britain's last two blast furnaces capable of producing steel from scratch using coke and iron ore. Long-running talks between the government and Jingye Group, the Chinese conglomerate that owns the Scunthorpe plant, broke down 10 days ago after executives declined an offer of £500m to keep the furnaces running. Ministers became convinced that Jingye bosses were determined to shut them down come what may. Senior figures in Downing Street and Whitehall believe the company's decisions were motivated by a desire in Beijing to make the UK a dumping ground for Chinese steel exports, particularly in the context of Donald Trump's tariffs. 'It became clear that when they saw the writing was on the wall they tried to shut down our steelmaking,' one senior official told colleagues. Another senior government source told the Guardian: 'They decided to shut it down because China needs to dump its steel somewhere.' Jingye has argued the plant is no longer financially sustainable and running a loss of £700,000 a day. Keir Starmer asked to receive hourly updates between his engagements on Thursday of last week after the talks with Jingye broke down. In the early hours of Friday, he was informed that ownership of the cargo on Navios Alegria had been transferred from British Steel to Jingye – a sign that the Chinese company intended to sell off the coal needed to keep the blast furnace running. Unions have claimed that Jingye had turned away the Amstel Tiger, a second cargo ship that was carrying coking coal to Scunthorpe and had set off from the US. The prime minister convened cabinet at 9am on Friday and told ministers they would gather again for a 15-minute meeting at lunchtime. Aides say he was concerned about the prospect of steelworkers being caught between the government and Jingye's orders, and that he asked the attorney general, Richard Hermer, to look at how workers defying Jingye bosses could be protected in that scenario. He also resolved to recall parliament on Saturday and travel to Scunthorpe in a show of support. The other overriding concern in No 10 was ensuring the delivery of the Navios Alegria's cargo. Starmer was convinced the move to transfer ownership of it away from British Steel was illegal. While government lawyers pored over the details, aides drew up a plan to divert the vessel – which was travelling up the coast of Liberia and was due to refuel in Spain – to Gibraltar, on the basis that if it docked at a British port its cargo could be seized. This gambit, which would have required some diplomatic manoeuvring with Spanish authorities, was nicknamed 'Steelback' by aides – a reference to the nickname of the British army regiment that received battle honours during the siege of Gibraltar in 1779. Officials also drew up contingency plans to source coking coal from other suppliers such as commodity traders and Tata Steel. By Saturday morning when Jonathan Reynolds, the business secretary, was addressing the Commons everything hung in the balance. 'Commodities traders were telling us they couldn't get there on time,' a senior No 10 source said. 'No one knew what would happen with the Liberian vessel [Navios Alegria]. We were on edge.' There were suggestions that the navy would need to be deployed to escort shipments of coking coal to Immingham. Sign up to First Edition Our morning email breaks down the key stories of the day, telling you what's happening and why it matters after newsletter promotion A breakthrough came on Saturday afternoon in the unlikely form of a legal wheeze. Government lawyers overseen by Hermer concluded that the person who had signed away the Navios Alegria cargo did not have the relevant permissions to do so. This discovery – which meant the cargo legally belonged to British Steel and would therefore soon be under the government's control – shifted the mood in Downing Street. Starmer was in Scunthorpe when he was given the news. At 6pm, the government's emergency bill received royal assent and gave ministers powers to exercise control over British Steel. On Tuesday, shipments of coking coal and iron ore from the US completed their comparatively uneventful journey to Immingham after the government settled the payment to deliver the supplies needed to keep the furnaces running. Downing Street figures say they took the decisions they did because amid an escalating global trade war and European rearmament, producing steel in the UK is a matter of national security. Officials believe the crisis may lead to a reassessment of what is deemed critical national infrastructure. Steel is not, but unions have called for a rethink in the wake of Trump's 25% tariffs on steel imports. Serious questions remain over the future of the Scunthorpe plant and the beleaguered British steel industry. The two blast furnaces at Scunthorpe are nearing the end of their lives. The cleaner electric arc furnaces that are slated to replace them would not produce steel from scratch, but instead smelt existing steel scrap. The government is due to publish a steel strategy within weeks, including a verdict on whether the UK needs to produce virgin steel. In the meantime, the government is looking for private sector investment to avoid the need to nationalise British Steel in the longer term – a route the Conservatives were keen to avoid in 2019 when Jingye was the only bidder. If no others emerge this year, ministers will face mounting questions about the cost to the taxpayer.
