1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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5hoursago Business

Britain'ssteelindustry:What'sgoingwrong?ByTimBowlerBusinessreporter,BBCNews

OneinsixjobsintheUKsteelindustryarenowatrisk

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

http://www.bbc.com/news/business34581945 2/12

Overthepastfewmonths,onepartoftheUKeconomythesteelindustryhasbeengrabbingthenewsheadlines,butforallthewrongreasons.

TataSteel'sannouncementofanother1,050joblossesatthefirmisjustthelatestblowtotheindustry.

Thecutscomeontopofthe1,200jobsaxedattheIndianownedgiantjustlastOctober,amidanindustrywidecull.

Aroundthesametime,Thailand'sSSIannounceditwasclosingdownitsRedcarworkswiththelossof2,200jobs,thenpartsofCaparoIndustries'steeloperationswentintoadministrationputting1,700jobspotentiallyatrisk.

Thesteelindustrysaysithasbeenhitbyacombinationoffactors:thestrengthofthepound,relativelyhighelectricityprices,theextracostofclimatechangepolicies,andcompetitionfromChinatherehavebeenallegationsthatChinesesteelisbeingsoldintheUKatunrealisticallylowprices.

Sowhat'sthetruthofitalljustwhyaresignificantpartsofBritain'ssteelindustryinsuchtrouble?

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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What'sbehindthecurrentcrisis?

Demandforsteelworldwidehasnotreturnedtoprefinancialcrashlevels.WitheconomiesparticularlyChina'sstillseeingweakgrowth,globaldemandforsteelissettoremainsluggish,fallingby1.7%in2015andrisingby0.7%in2016.

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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AstrengtheningpoundhasbeenoneofthefactorsmakingUKsteelexpensiveontheinternationalmarkets.

Insummer2015,sterlingreachedasevenyearhighagainstabasketofcurrencies,afterBankofEnglandGovernorMarkCarneysignalledthefirstriseininterestratessincethecrashcouldsoonerthanexpected.

Atthesametime,globalsteelpriceshavefallensharply.Meanwhile,China'sowneconomicslowdownhasledChineseproducerstoseekexportmarketsastheirhomedemandhasstalled.

Asaresult,UKimportsofChinesesteelhaveincreaseddramatically.In2014theUKimported687,000tonnesofsteelfromChinacomparedto303,000tonnestheyearbefore.

ItistruethattheUK'ssteelimportsfromtherestoftheEUaremuchhigher4.7milliontonnesin2014,butcruciallyChinaissellingitssteelatmuchlowerprices.

AccordingtoEurostat,theEU'sstatisticsagency,EUsteelimportsintotheUKcostonaverage897eurosatonnein2014,whileChinesesteelimportswerejust583eurosatonneleadingtoaccusationsthatitissellingatunfairlylowprices.

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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Highenergycostsforenergyintensivebusinesseslikesteelproductionarealsoafactor,saystheindustry,addedtobytheextracostofclimatechangepolicies.UKSteel,theindustrybody,saysgovernmentpoliciestocompensatesteelcompaniesfortheseextracostshavebeencomingintooslowly.

TherearealsostrictEUrulesthatrestricthowmuchsupportgovernmentscangivetoparticularindustries.

Howmanyjobsareatrisk?

Almost20,000peopleareemployedinthesteelsector,andmorethanoneinsixarenoweitherlosingtheirjobsoratriskoflosingthem.

Britain'sbiggeststeelproducer,theIndianfirmTata,whichemploysaround17,000intheUK,hasjustannouncedanother1,050joblossesinsteeloperations.

Thecutscomeontopofthe1,200jobsitalreadyaxedlastOctober,amidanindustrywidecull.

AlsoinOctober,thecountry'ssecondlargeststeelproducer,ThaifirmSSI,saiditsRedcarworksonTeesside,wouldgointoliquidationwiththelossof2,200jobs.

Atthesametime,CaparoIndustrieswentintopartialadministration,putting1,700jobsatpotentialrisk.

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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IsitreallyallChina'sfault?

TheindustryblamescheapChineseimportsforacollapseinsteelprices.

Chinesesteelproducersareaccusedof"dumping"exportsintheEU

ItiscertainlytruethatChina'sdramaticeconomicgrowthsinceliberalisationstartedin1979hasbeenoneofthekeydriversintheglobalsteelmarket.

Itisnowtheworld'sbiggeststeelproducer,accountingforaround822milliontonnesayear.TheUK,whichproducesjust12milliontonnesayear,isaminorplayerintermsofabsoluteoutput,buthassoughttospecialiseinhighquality,highvaluesteelproducts.

WithChina'smarketslowing,theirproducershavebeenlookingforexportmarkets,suchastheEU.

Thishasledtoaccusationsofunfaircompetition,thatChineseproducersare"dumping"steelproductsonoverseasmarketsthatisnotjustsellingthemcheaply,takingadvantageoftheirlowerproductioncosts,butactuallysellingthemataloss.

In2015,theEUimposedantidumpingdutiesforsixmonthsonsomesteelimportsfromChinaandTaiwan.TheEUandChinahavealreadyclashedovertheallegeddumpingofproductsrangingfromwinetosolarpanelstosteelpipes.

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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UKsteelmakershavealsoblamedhighenergycosts,greentaxesandthestrongpoundfortheirdifficulties,sayingthatcomparedtoforeigncompetitorsthecostofmakingsteelintheUKistoohigh.

HowimportantissteelfortheUK?

Steelitselfisvitalforjustabouteverythingweuse.Whetheritisbuildings,clothes,chemical,cars,lampsordrinkscansalldependonitatsomepoint.

Aswe'veseen,almost20,000peoplearedirectlyemployedinthesteelindustry.GiventhetotalUKworkforceis30million,that'sjustonein1,500jobs.Butcruciallysteelisnotalabourintensiveindustryautomationandcomputerisationhasseentothatsorawnumbersarenotthewholestory.

Almost20,000aredirectlyemployedintheindustry,butthousandsmoredependonitforwork

Manyarguethatthisisnotjustacrisisforthesteelsector,butoneaffectingUKmanufacturingingeneral,whichaccountsforroughly10%ofUKeconomicoutput.

Thisisbecausebesidethejoblossesalreadyannounced,therewillbeanimpactinotheralliedsectorsonsteelprocessors,distributors,scrapmetaldealers,metaltradersandothermetalproductmanufacturers.

Whatcanthegovernmentdo?

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1/18/2016 Britain'ssteelindustry:What'sgoingwrong?BBCNews

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Theindustryisclearwhatitneeds:lowerbusinessrates,arelaxationofcarbonemissionstargetsforheavymanufacturers,morecompensationforhighenergyprices,andacommitmentthatBritishsteelisusedinmajorconstructionprojects.

ThegovernmentheldasteelsummitinRotherhaminOctobertodiscusswhatcouldbedone.

Thegovernmentisunderpressuretodomoretosupportthesector

Itsaysithasalreadytaken"clearaction"tohelptheindustry,"throughcuttingenergycosts,takingactiononimports,governmentprocurementandEUemissionsregulations,meetingkeysteelindustryasks."

ButindustrytradebodyUKSteel,saysitstillneedstodomore.

"Theworkit'sdoingtohelpusisgoodbutweneedmuchfurtheractiontakingplacetotackletheimports,thefloodofChinesesteelintotheUKandtheEuropeaneconomy.

"WeneedtoseegovernmentandtheEuropeanCommissiontacklingthatheadonandquickly,"GarethStace,directorofUKSteel,toldtheBBC.

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