British Steel……………

I think it's a real concern for everyone, even the Tories.

Trouble is, what do you do? This isn't a case of the Steel industry f+cking up is it? It's about being undercut by overseas competition who don't give much of a stuff and can afford to sell at a lower price. Same as cars, coal and cleaners.

Can we unilaterally impose import tax on Chinese steel, starting a trade war we can't win? And it's probably not even legal these days is it?

Not if we get out of the EU. Outside we could be as maverick as we want to be, though it might do us much good.

Given that EdF is effectively the French Government and they seem to be able to operate as they see fit.................. and the Chinese steel industry must be a Government Capitalist venture selling at a loss......................... I can't see anything wrong with the UK Gov, buying a 99.9999% stake in the entire British Steel industry for £1 (assuming Tata can't find a buyer by close of business on Friday 1st April 2016).

Further, I can't see anything wrong with the UK Gov then providing tax-free fuel and Zero-rated business rates and Zero-rated Corporation Tax so that the Industry can produce steel at a reasonable price and then be allowed to sell it at a loss, until global markets pick up. I think the other European steel makers work on a similar set of principles.

Oh, and all UK projects requiring steel will be obliged to incorporate a "reasonable" amount of British steel in their projects, say 99.9% minimum, leaving adequate scope for overseas suppliers to fulfill any shortfall and introducing "competitive" price bench-marking.

Sod the EU and the WTO, until they sort out other abusers of the system.

Trade wars result in everyone losing. Pulling up the drawbridge and indulging in 'patriotic' protectionism I suspect would be a disaster in wider terms however tempting.

Not sure I have a positive suggestion though, sadly.

Bruce

The Chinese, by destroying the UK steel industry have been waging a trade war for some time. The UK govt have refused to back EU initiatives and others in the EU have found ways to keep their own steel industries. I firmly feel that the EU and the UK should refuse to import dumped steel, furthermore they should clamp down on unsafe products (e.g. dangerous motorised skateboards and poisonous dog treats) and refuse to import products made under sweatshop conditions or using child labour. I suspect that would alter the balance of trade with China very quickly.

The difficulty is that we're seeing only a small manifestation of the complex web of inter-trade agreements that go on internationally. I imagine the UK, for not joining in with the EU's desire to limit steel imports, have been given preferential rights elsewhere.

If steel production ceases in Port Talbot & elsewhere in the UK there'll a huge cost implication, not just in terms of human misery and the costs of having that number of people out of work, but also the toll it'll take on associated businesses. One would hope that if the government's decision is not to intervene, we would get to learn of the total cost of such a decision, but I doubt it; it's not this government's policy to intervene in what they like to imagine is a free market, but in reality is no such thing.

Some interesting stats => http://www.themanufacturer.com...acturing-statistics/

British Steel at a glance

• 30,000 direct jobs
• 54% of UK Steel workers work in Yorkshire and the Humber, or Wales
• Annually adds £9.5bn to the UK economy
• Exports worth £4.9bn in 2013
• 1m tonnes of output in 2014
• The value of the industry has declined by almost a quarter (24%) since 1990

Contribution to UK economy comparable in size the the British furniture industry...

/dl

Problem is TATA probably don't want to sell it,  or at least sell it as a going concern;  they are a major steel manufacturer manufacturing facilities in 26 other countries. Considering how bad the global steel market is at the moment TATA do not want another competitor.  

There are times for the State to step in, and this is surely one of them. The U.K. government seems to be the ringleader in preventing the EU slapping tariffs on imported steel, and another case of dogma trumping common sense. 

Based on the claimed losses by Tata, 12 pence per week from everyone in the UK would cover the losses --- but unfortunately it's rather more complicated than that!

And there is of course pension fund to maintain.....no idea what the deficit is there.

The carbon taxes on all heavy industry energy users are a nonsense. While supermarkets like Tesco and M & S can save energy in all sorts of ways there is no way one can make steel, cement, bricks et al without lots of heat, and so imposition of energy taxes by the save the bunny brigade inevitably drive production overseas.

if there is any private bid to step in don't be surprised if it ends up like British Leyland/rover or whatever it ended up as!

On Don's original comparison between bailing out the banks and this situation, I think they are distinctly different.  

I won't opine on the argument about who ethically or morally better deserves tax-payer support: wealthy(greedy) top bankers or the ordinary steel-worker?  Instead I think the more important distinction is the potential impact on the country.  If HMG had been prepared to let the big banks go to the wall, the cash-points would have frozen and ten of millions of people in the country would not have been able to get their cash.  There would have been serious civil unrest.  Also any developed economy needs a fully functioning and viable banking sector.  It can get by without a steel industry.

I know that's hard-nosed and I know too that there are good arguments about steel making being strategic asset that we would be foolish to lose.  But on the banks I firmly believe that the Government of the day had no choice but to intervene.  It does have a choice with steel.  

MDS posted:

On Don's original comparison between bailing out the banks and this situation, I think they are distinctly different.  

I won't opine on the argument about who ethically or morally better deserves tax-payer support: wealthy(greedy) top bankers or the ordinary steel-worker?  Instead I think the more important distinction is the potential impact on the country.  If HMG had been prepared to let the big banks go to the wall, the cash-points would have frozen and ten of millions of people in the country would not have been able to get their cash.  There would have been serious civil unrest.  Also any developed economy needs a fully functioning and viable banking sector.  It can get by without a steel industry.

I know that's hard-nosed and I know too that there are good arguments about steel making being strategic asset that we would be foolish to lose.  But on the banks I firmly believe that the Government of the day had no choice but to intervene.  It does have a choice with steel.  

Hi Mike,

I don't doubt what you say is true wrt the "trivial" matter of Hole-in-the-Wall cash points. However, I think this epitomises the whole concept of Government thinking. ie Short-term fire-fighting - and the fire is the equivalent of a paper fire in a metal waste bin ! Greece managed to survive !

The two points I was making boil down to :-

• Long-term strategic planning
• Bending the rules keep up with others who are undoubtably bending the rules

You are correct to say that the Gov has a choice with steel. let's hope it makes the right long-term economic choice.

Bruce Woodhouse posted:

Trade wars result in everyone losing. Pulling up the drawbridge and indulging in 'patriotic' protectionism I suspect would be a disaster in wider terms however tempting.

Not sure I have a positive suggestion though, sadly.

Bruce

Hi Bruce. I agree with you on both counts, in general.

There are overt trade-wars and there can be subtle trade-wars. I was suggesting we do something subtle.

If the Gov can take a stake in RBS, i'm sure it could take a stake in BSC (or whatever it might be called, this time around), if it wanted to. It could also sort out energy costs and tax liabilities if it wanted to. No need to even consider any form of import tariff on dumped Chinese steel or any form of overt trade war.

Does British made steel have any superior qualities compared to made in China steel?

naim_nymph posted:

Does British made steel have any superior qualities compared to made in China steel?

I think plants have shifted to making high quality and specialist steels in order to preserve some niche in the marketplace. Unfortunately not all our competitors are in Asia, European nations such as Germany and France also produce these steels.

Bruce

George Fredrik Fiske posted:

Not if we get out of the EU. Outside we could be as maverick as we want to be, though it might do us much good.

Of course that assumes that the British Government want to do something to protect the steel industry ... the EU wanted to allow punitive import duty on Chinese Steel imports ... the UK blocked it!

You're starting to sound a little like Nigel Farage there ...

I've no idea of the answer to this ... but they say that British Steel industry has a capacity of (I think) 12 million tonnes a year.  How does that compare to the British demand for steel.  Could it all be sold in UK if there wasn't competition from China (at a lower cost) or does that 12million tonnes represent a glut for British demand?

To save to Port Talbot plant...

£360M per year (loss = £1M per day),  3,500 jobs directly affected, +3,500 indirectly at risk.
= more than £50,000 per job per year.  This isn't economically viable.
It would be cheaper to close the plant and give each worker at the plant £100k pa than to keep the plant open.

The comparison to the banks isn't valid as it stands either, if the banks had been allowed to fall, two (or possible three) of the five UK clearing banks would have fallen.  There wouldn't have been enough capacity in the UK banking industry to keep the payments systems working with the required daily transaction rate.  It's not just a proportion of ATMs that would have stopped, but the entire rest of the UK banking system would have collapsed under the resulting strain.

Huge ... I agree you can't just save the plant and not do anything else to help the industry.  But its not 3,500 + 3,500 jobs Port Talbot ... if that goes the rest of the UK steel industry goes so 40,000 jobs (15,000 directly and 25,000 indirectly).  Port Talbot is where the money is being haemorrhaged because they can't sell their steel at a profit.  But already if you consider 360million to save 40,000 jobs thats £9,000 a year ... much less than they will claim in welfare!

But the government could do things to protect the industry once its been saved.  How much of the 1million losses is due to cost cutting due to trying to compete against Chinese markets?

I agree the comparison to banks isn't valid.  But the government is showing its true colours and that industry is of zero importance to them / their view of Britain.

As Dave said ... "Nothing is ruled out" ... except for the nationalisation option which we have ruled out ... I'm not sure that phrase means what he thinks it mean.

Eloise,

The £100k per employee is the Port Talbot plant alone and it's £360M losses.  What are the total losses of British Steel?

To evaluate the cost of the loss per employee, over the whole organisation and it's 15,000 employees, you need to use the total losses of the organisation.
The £9000 figure is unlikely to be correct (i.e. it will only be £9000 if the entire rest of the organisation exactly breaks even on average).

I don't believe the steel industry is of zero importance; just that it, and all the other struggling heavy industries can't be fully subsidised (this isn't realistic either economically or politically).

Huge ... I'm sure there are half truths in both points of view and the truth is something in the middle.  The true details are commercially sensitive of course.  The £100k per employers is no more the real cost as the £9,000 is. The whole industry is linked so if one (major) part fails then others will inevitable fail regardless of if they are currently profitable - to say the whole industry will fail is wrong (I acknowledge) but you can't just examine Port Talbot in isolation and say thats only 3,500 jobs so the cost of saving those jobs is too high based on the £360m loss.

An interesting statistic ... In 2014, Chinese steel imports to the UK cost €583 a tonne compared to €897 a tonne for steel produced elsewhere in the EU, according to reports quoting the EU’s statistics agency, Eurostat.  Now, what no one says is IF Tata were selling their steel at €897 a tonne ... would Port Talbot (and the rest of the industry) be viable?

I wasn't accusing you of believing there is zero importance in the UK industry ... but the way the government are acting it appears there feel there is zero importance (at least compared with fostering greater links with the Chinese).

There are many things the government could have been doing to help the industry.  But its only now when the options have pretty much boiled down to two unpalatable extremes - either let the industry fail completely or step in with full or partial nationalisation - that they are running around like headless chickens with hollow platitudes.

On a lighter note: I'm sure there is something ironic about the Business Secretary turning up to Port Talbot in an car build predominantly of aluminium, by a company which was formerly nationalised and now a subsidiary of an Indian company call ... yes thats right Tata!

China slaps punitive tariffs on HQ steel imports, wonder if they'll continue to flog us illegally subsidised steel at a low price once alternative sources dry up.

SAT posted:

China slaps punitive tariffs on HQ steel imports, wonder if they'll continue to flog us illegally subsidised steel at a low price once alternative sources dry up.

Of course they will ! Cameron likes them...........................................

as does his right hand man, Gideot.