Real deal for British Steel? Fresh hopes for UK jobs

Posted on 8 Nov 2019 by The Manufacturer

A Chinese steelmaker is tipped to buy British Steel out of insolvency – this after a Turkish bidder left the company in limbo when its offer collapsed in October.

China’s Jingye Group has emerged as the next possible owner of the embattled British Steel company, where around 25,000 jobs are still hanging in the balance.

British Steel has managed to keep the fires burning because the UK government has stoked them since May this year while seeking a new buyer.


This is not the first time control of British Steel has been attempted.

In October, there were whispers steel tycoon Sanjeev Gupta, group owner of industrial metals company Liberty House Group, was tipped to take over the Scunthorpe works.

Then, later that month, the government reopened talks with bidders after failing to reach terms with Turkey’s Ataer Holding, which was granted exclusivity over the deal in August. Ataer owns around half of Erdemir, Turkey’s largest steel producer, and functions as the investment arm of Oyak, the pension pot for the country’s armed forces.

However, UK MPs expressed unease about Ataer’s relationship with the Turkish government after the country’s military crossed into Kurdish-held parts of Northern Syria.

UK Steel in Numbers (courtesy of UK Steel/Make UK):

Overview of the UK Steel sector - UK Steel in Numbers - Make UK Oct 2019

Soon after Atear’s position for the steelmaker became uncertain, Network Rail was reported to be poised to take over a portion of British Steel.

The track operator had been considering making a bid for part of the Scunthorpe-based company as early as June, according to The Sunday Telegraph.

British Steel was placed into compulsory liquidation in May 2019 when salvage attempts by the government collapsed. The downturn was due, in large part, to increased competition from cheap imports from China and a slump in orders.

It is estimated some 5,000 British jobs are under threat, and another 20,000 in the supply chain.

The UK government was urged in early October to address soaring electricity prices putting undue pressure on the country’s steelmakers, preventing them from being competitive in Europe.

A report by UK Steel entitled, The Energy Price Gap: A New Power Deal for UK Steel, called for a “level playing field” on energy prices, so that British steel companies can compete in a new trading environment created by Brexit.

Full Crop - Yorkshire is a major hub of rail research. National College for High Speed Rail opens in Doncaster and Huddersfield hosts an Institute of Rail Research - image courtesy of Depositphotos.

The UK pays on average 62% more than Germany for electricity and around 80% more than France, according to the report. This, in an industry where “electricity represents the largest cost after raw materials”.

UK Steel director general, Gareth Stace, said at the time the disparity for steelmakers in the UK has cost the industry £47m this year, at a time where “the sector is already facing wider market uncertainties and trading difficulties”.

Will they? Won’t they?

Jingye Group has confirmed negotiations with British Steel are underway but has not disclosed details of an official bid. It is expected to announce a first-stage agreement by 11 November, though it has not confirmed that timing.

Last week, Jingye Group’s chairman Li Ganpo reportedly visited British Steel and met with local government representatives. He told Andrew Percy, MP for Brigg and Goole, that if his company were to seize control of British Steel the company would be “protected”.

The official receiver, the person handling British Steel’s insolvency process, has made no comment to national media. But Jingye’s goal would be to ramp up production at the Scunthorpe site from 2.5 million tonnes each year to more than 3 million, according to the Financial Times.

Part of that process would reportedly be a plant upgrade, cost cutting and improved overall efficiency.

Since May, around 80 bids have been reportedly made for the business, particularly from European steel producers.

By Rory Butler, Staff Journalist

*All images courtesy of Depositphotos