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The mothballing of SSI’s steel plant in Redcar on Teesside has come as a hammer blow to the 1,700 workers who will lose their jobs, in an area which already suffers from high unemployment. But the effects of the closure will be felt further afield. SSI’s misfortune has sent waves of concern throughout the steel industry as a whole.
The company has “paused” production, citing poor trading conditions and a drop in world steel prices. Many of the problems at the plant are also being encountered at other facilities such as Tata’s operations in Rotherham, South Yorkshire, and Port Talbot in South Wales.
The sector is being battered by a slump in the price of steel – with depressed returns expected to remain in the short term. The industry is also being hit by a rise in unfairly traded imports and a strong pound. And so any plant with higher than average costs in a fiercely competitive market could face a very uncertain future over the next few years.
It was timely, then, that Britain’s steelmakers got together in London at the end of last month to issue a warning to the government over the perilous state of the sector. The meeting was organised by lobby group UK Steel.
Ministers were warned that the industry would only be given “half a chance” of survival if immediate steps were taken to alleviate short-term pressures and to allow it to compete on a level playing field with other steel-producing nations.
First and foremost, business rates for capital-intensive firms must be brought in line with competitors in France and Germany, said UK Steel. UK companies are paying 5-10 times more than their EU competitors, it was claimed.
The government was also urged to fully consider derogation requests on a realistic timetable to meet increased commitments under the Industrial Emissions Directive. Under current proposals, the cost of meeting revised permits for the sector are estimated at up to £500 million by 2019. And the government needs to continue to back EU action on anti-dumping measures which support the UK steel sector against the rapid rise in imports from lower-cost regions.
But why does any of this matter? The steel sector has been in decline for years, and if British foundries cannot compete then maybe they should be left to wither? UK Steel rejects this laissez-faire stance, claiming that the industry remains vital to the success of manufacturing, employing 30,000 people. In 2013 it made a £9.5 billion contribution to the economy. The sector is also the foundation of many important supply chains.
Gareth Stace, director of UK Steel, warned that the steel industry was facing its most difficult situation since it was privatised 27 years ago. “The industry is facing a perfect storm,” he said. “If the sector is to continue its vital role supplying the rest of manufacturing then we cannot afford to stand by. Government has within its power the gift to take immediate steps which can alleviate pressure in the short term.”