Recent posts on eSQUIRE Global Crossings have highlighted the problems in the oil and gas sector and unfortunately this is not the only sector under pressure.

Job losses and insolvency in the steel industry

Over the past few weeks, UK job losses in the steel industry have run into thousands. SSI was placed in compulsory liquidation at the start of October and having attempted to find offers for the business without success, the coke ovens and blast furnace are being closed down in Redcar Steel Works. These and other assets are being sold on a break up basis and 1700 workers have lost their jobs.

The misery continued as 1200 redundancies were made at Tata Steel across Scunthorpe and Lanarkshire.

The majority of companies in the Caparo Industries group have entered administration with another 1700 steelworker jobs in the balance.

Kiverton Park Steel based in Sheffield, a much smaller outfit than those mentioned above, is also in administration but is continuing to trade whilst administrators search for a buyer.

Where the UK stands in the world of steel

Amongst EU countries, the UK ranks fifth behind Germany, Italy, France and Spain for crude steel production, but it would take the combined production of the EU, other European countries, the Americas, the CIS, the Middle East, and Oceana to rival the amount of steel made in China alone.

From January to August this year, World Steel Organisation figures show that China was producing on average 66 million tonnes of crude steel per month compared to the UK’s monthly output of only circa 1 million tonnes.

Why the problems?

Many in the British steel industry blame the influx of cheap steel from China for the problems, and China does indeed have millions of tonnes to spare, even after satisfying the needs of its own internal market. The recent state visit from China’s president President Xi Jinping appears to have done little to appease the steelworkers, stating he appreciated the UK’s commitment to free trade, although the President did state that steel production in China was also being reduced.

The World Steel Organisation’s statistics for September this year however make for depressing reading, showing that whilst China still produced some 66 million tonnes, the UK figure dropped to just 579,000 tonnes. Perhaps unsurprising amongst the news of high profile closures, but deeply concerning.

Of course the difficulties experienced in UK steel have other causes. A strong pound, a slowing general demand for steel, high taxes, business rates and energy prices are all having an impact, and the UK steel industry has pleaded for help from the UK government to address the issues with operating costs and to provide a commitment to using UK produced steel in UK projects such as the HS2 network.

Any solution will involve compromises – if the UK consumer ultimately has to pay more for UK steel or the steel industry receives better concessions, subsidies or tax breaks, the suffering, albeit in a different form, could be passed on to other groups or sectors – but the UK government will not want to alienate the Chinese. Whilst the UK struggles with and debates these challenges, Chinese steel producers are receiving heavy subsidies from their government and can offer to shed their excess steel at bargain prices, this bringing down the global steel price. Consumers will be tempted to import the cheaper product into the UK rather than using British-made steel, notwithstanding warnings from UK Steel about some of the quality of steel being imported.

The next few months

The sad reality remains that many steelmakers in the UK cannot compete at this point in time, which has led to a reduced output, redundancies, restructurings and insolvencies – a trend that, without a different approach by the UK government to UK steel production, is set to continue.