The UK’s steel industry has been in decline for decades. Companies that held out are now under more pressure from record Chinese exports, a stronger pound and weaker demand.
The squeeze is forcing more plants to close or reduce jobs. Tata Steel Ltd, the UK’s biggest producer, yesterday announced 1,200 job cuts and said it plans to stop producing steel plate at plants.
On Monday, 16 companies that comprise Caparo Industries PLC, owned by Swraj Paul, a member of the UK’s House of Lords, were placed into administration.
The steel industry has been roiled by the slowest economic growth since 1990 in China, the biggest consumer.
European mills are also battling a flood of cheap exports from the Asian nation, producer of about half of the world’s steel, as its own producers ship cheap metal overseas.
In the UK, the pound’s 19 percent advance against the euro since early 2013 has made steelmakers less competitive.
“The UK steel industry is struggling for survival in the face of extremely challenging market conditions,” Karl Koehler, chief executive officer of Tata Steel’s European operations, said in a statement yesterday. “Inaction threatens the future of the entire European steel industry.”
Tata said it would stop production of steel plates at plants in Scunthorpe, England, and Scotland due to a flood of cheap imports from China.
The company called on the European Commission to tackle what it called unfairly-traded imports.
The collapse of Caparo’s steel business follows the closure of the the Redcar plant last week after the UK’s Insolvency Service failed to find a buyer.
PricewaterhouseCoopers LLP, the administrator for Caparo, said it is assessing opportunities to restructure or sell the businesses and their assets.
Global steel demand would contract by 1.7 percent to 1.51 billion tonnes this year, the World Steel Association said last week, reversing an April forecast for a 0.5 percent increase. Consumption in China is to decline 3.5 percent this year to 685.9 million tonnes and slide a further 2 percent next year, it added.
With production slowing less than demand, mills are churning the surplus onto global markets, pushing down prices and spurring trade tensions from Asia to the US.
POSCO, South Korea’s biggest steelmaker, yesterday reported the largest quarterly loss in at least five years amid losses on foreign exchange and mining assets, a lawsuit settlement, and as a deluge of Chinese exports pushed down world prices.
The net loss, excluding minority interests, was 534.2 billion won (US$474 million) in the three months ending last month, from a 237.8 billion won profit a year earlier, the company said. That compares with an expected loss of 156 billion won, according to the average of 13 analyst estimates compiled by Bloomberg.
The company was the world’s fifth-biggest producer last year, with output of 41.4 million tonnes, according to the World Steel Association.
That compares with 49.3 million tonnes for Nippon Steel & Sumitomo Metal Corp, and 98.1 million tonnes for ArcelorMittal SA.
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