Steel: All Quiet on the Western Front

Written By: Andrew Rosthorn
Published: October 23, 2015 Last modified: October 23, 2015
Smelt a lot of good steel and accelerate socialist construction

Which country is less secure – one that does not possess its own weapons of mass destruction, or one that cannot make its own steel?

John Wilson asked the question in a celebrated short letter to The Guardian on October 2. No answer came.

British imports of Chinese steel have quadrupled in four years.

China’s loss-making steelmakers dumped raw steel on 8 per cent of the British market and the Chinese ambassador Liu Xiaoming bragged in London this week: “If you continue to stay with your old, traditional business, you’re losing money and opportunities. China is making adjustments – why not Britain?”

All 2,000 jobs went at Redcar when they shut down the blast furnace and coke ovens last week for the first time in decades.

Tata declared 900 redundant at Scunthorpe and 270 at Motherwell and Cambuslang on Tuesday October 20.

Administrators from PwC arrived at Caparo Industries in Oldbury, headquarters of the biggest manufacturing business in the Black Country, employing 1600 workers in 20 locations. PwC has taken over 16 of the Caparo firms.

The names of the subsidiaries harked back to great days of metal bashing: Hub le Bas at Bilston. Accles and Pollock, Atlas Fastenings at Wednesbury, Caparo Tube Components and Clydesdale Jones in Neachells Lane, Willenhall, CMT Engineering in Cradley Heath and Bridge Aluminium, in Wednesbury.

The firm, founded by Lord Swraj Paul, chancellor of the Wolverhampton University, lost £2.5 million last year.

Roy Rickhuss, general secretary of Community, the steelworkers’ union, described Caparo’s failure as “another devastating blow to Britain’s steel industry”.

Stewart Towe, chairman of the Black Country Local Enterprise Partnership and managing director of Smethwick steel business Hadley Group, pointed out that Caparo has been a high quality producer of processed steel for advanced manufacturing in automotive and aerospace.

Tony Burke assistant general secretary for manufacturing at the union said:

Government ministers need to ask themselves: How many more steel firms need to go to the wall before they step in and support the UK’s steel industry? Failure to act urgently could lead to a ‘domino effect’ taking hold across the industry, leading to the loss of yet more skilled jobs.

Caparo’s workforce produce high quality finished steel products and has been battling against an increasingly challenging global market. The loss of 1,800 jobs would have a serious impact on the communities around Caparo’s workplaces.

On Wednesday, during the Chinese state visit, the Government revealed that Aston Martin at Gaydon has agreed a £50 million deal with China Equity to develop a zero-emission RapidE sports car, and Geely, Chinese owners of the London Taxi Company at Coventry, announced an additional £50 million investment on research into zero-emission black cabs.

On the eastern front British-built Jaguar Land  Rover sales in China are down by  36.8 per cent.

chinasteelboss

Xu Lejiang chairman of Shanghai Baosteel Group told reporters at a forum on Wednesday that China’s steel industry is bleeding cash. The largest steel industry in the world lost 18 billion yuan (£1,841,480,817) in the first eight months of the year, compared with a profit of 14 billion yuan in the same period in 2014.

The vice chairman of the Chinese Society for Metals and an alternate member of the 17th and the 18th Central Committee of the Communist Party of China since 2007 said China had increased steel production 12-fold between 1990 and 2014:

If we extrapolate the previous experience in Europe, the United States, Japan, their steel sectors have all gone through painful restructuring in the past, with steel output all contracting by about 20 per cent. China will eventually get there as well, regardless how long it takes.

Steel prices have slumped by about 27 per cent to 28 per cent year-to-date. So how much further can the steel price drop? I think we are back to the question on how long those loss-making mills can keep producing. If nobody exits the market, the price will fall further. But I think it won’t be like this for too long.

Top picture: China 1959 “Smelt a lot of good steel and accelerate socialist construction”.
Xu Lejiang courtesy of China Pictorial