Those campaigning for an exit from the EU say the current UK steel industry crisis is yet another reason why the nation should go it alone. Some say today’s global economy means home-grown steel will never again be cost-effective and, like the coal industry in the 1980s, should be put out of its misery. Thanks to the flood of cheap steel from China, the market is saturated and jobs are at risk worldwide. At the same time Tata’s boss says our home-grown steel industry is both under invested and over manned.
What might a Brexit bring to UK steel?
Brexit supporters say we’d be able to bring in massive new tariffs on Chinese steel if we leave the EU. In their eyes leaving the EU would free us to either subsidise or nationalise the nation’s steel sector. Others believe starting fights with international competitors like China isn’t the way forward. At the same time the EU currently accounts for more than 50% of Britain’s steel exports, which means leaving could be disastrous.
EU members benefit from trade deals with more than 90 countries, and the biggest yet – with the US – is on the cards. Is this kind of strength in numbers the best way ahead? A decision is vital, since we can’t support free markets with one hand but enter trade wars with economic superpowers like China with the other.
The conundrum continues
It’s a tricky question. We can either support free markets or nationalise entire industries. While it might be a good idea to sell Tata’s Port Talbot plant, constant subsidies are not helpful in the longer term. There’s more. Most experts acknowledge there’s a choice to be made between cheaper steel prices for consumers and businesses outside the EU, and new tariffs and subsidies within it. You can’t have both.
China’s economic slowdown has led to chronic steel over-production, and the authorities there predict half a million of their domestic steel jobs will go down the pan in the not too distant future. Chinese steel losses amounted to £11bn in 2015, and Port Talbot is losing a million pounds a day right now. At the same time steel export prices fell from $1,113 per tonne in summer 2008 to just $321 per tonne in March 2016.
Ratan Tata thinks things are looking bad right now, but hopes change will help the British steel industry pull through. At a Washington conference he revealed cuts are vital if the Port Talbot plant is to have a profitable future.
What if Tata pulls out?
If Tata does decide to pull out of Britain, 40,000 UK jobs will be at risk, way more than are employed in the steel industry itself. Tata’s Scunthorpe plant is currently under question, with Greybull Capital recommending pay cuts from workers as well as changes to pension deals. If the answers are no, Greybull will probably walk away from the life-saving deal. Liberty House, the owner of two ex-Tata steel mills in Scotland, may buy Port Talbot. But there’s no quick fix so far, for an industry teetering on the brink of disaster.
Let’s hope there’s a equitable solution in the pipeline. In the meantime we remain your premier carbon steel suppliers as well as the go-to aluminium suppliers, brass suppliers and metal suppliers for all manner of purposes.
THE LATEST FROM THE BLOG