Swift & decisive action needed to support UK steel

Posted on 9 Sep 2016 by Jonny Williamson

Government and industry officials from G20 countries will need to move fast to prevent more steel plant closures and community catastrophes, according to the head of UK Steel.

The ‘Global Forum on Excess Capacity in the Steel Sector’, set up to tackle the over-production of steel following the G20 summit in China, is meeting behind closed doors in the French capital a year after the closure of the Redcar works which sparked the start of a crisis in the UK steel industry.

In the twelve months since the closure of Redcar, with the loss of 2,000 jobs, the US and the EU have erected trade barriers in an effort to prevent unfairly traded Chinese steel, made and sold at below the cost of production, flooding markets and distorting competition leading to further pressure on the sector.

Gareth Stace, new director, UK Steel.
Gareth Stace, director, UK Steel.

However, according to UK Steel, although these measures – with the support of the UK Government – have had some impact, the source of the problem remains stubbornly familiar.

Its director, Gareth Stace, welcomed the Forum’s creation, but warned: “It is crucial that this new Forum moves quickly and has real bite, to avoid replicating mistakes with previous forums, all of which proved ineffective.

“The Global Forum for Steel must address the source of the problem and ensure China is cutting its net steel-making capacity. And we need a clear system for demonstrating both the pace and extent of this.

“A real cut in steel capacity, most notably in China, is necessary as opposed to the closing of so called ‘zombie sites’, while at the same time opening bigger facilities elsewhere that actually add to total capacity and exacerbate the current crisis.

Stace noted that the crisis hasn’t ended, something he said could be seen in the predicted reduction of 30% in steel production output in 2016 compared with 2015 – 10.9mt and (estimated) 7.6mt respectively, with UK demand expected to be approximately 10.4mt.

He added: “While our sector enjoys zero tariff status in many economic regions around the world, we have also seen a rapid rise in trade defence instruments being used to address regional problems of unfair trade.

“We all know that this is a much-needed short-term reaction to ensure a fair and level playing field. However, we must feel comfortable that we are actually working through a plan of global action that ensures TDIs are not needed.

“In the UK and across Europe we have seen employers, trade unions and politicians come together and agree on the extent and cause of the problem, the need to address it and importantly agreeing on the actions that need to be taken.

Although global steel prices have increased slightly – albeit from a significantly low base, Stace concluded that a primary problem for the global sector was the short-attention of politicians, many of which are too keen to move on to other issues and problems.

He said: “This potentially leaves us to slide back to the deeper crisis we saw only a few short months ago.

“As fundamentally, for the sector we know that very little has changed in terms of the causes of the global problem. Global utilisation still stands at 70% or below and we are not seeing any significant rise in demand.”