By World Infrastructure Journal-
UK Steel, once a foundation of the economy, has long been abandoned by the Government. A symbol of nationalised Britain’s bygone industrial heyday. Yet for manufacturing communities across the United Kingdom (UK), the coronavirus pandemic has become another blow to an industry already under threat. Not only has production been severely dented, but the Government has also failed to provide an industry support package or conclude long negotiations with Tata Steel to sustain their at-risk operations across the UK.
For Stephen Kinnock, MP for Aberavon, which includes steel community Port Talbot, “it is troubling that once again, the British Government is lagging behind”.
He was clear that this cannot continue, and the Government needs to “take this by the reigns and make something happen in a matter of weeks, not months”. The UK Government is one of the only steel economies across Europe who has failed to offer their industry a support package throughout the pandemic. In both France and Germany, substantial aid was secured within a matter of weeks.
For industry leaders, who have seen other sectors receive significant packages, this is extremely disappointing. This is especially hard given that a proposed collaborative steel investment fund was rejected by the Government at the beginning of the pandemic because it required policy change on electricity prices.
Negotiations between the UK Government and Tata Steel, an Indian conglomerate which owns most steel plants across Wales and specifically the Port Talbot hub, have yet to come to any fruition. These have been ongoing for many months since it made a pre-tax loss of £654 million prior to the pandemic and announced plans, in November 2020, to make the UK arm of its operations self-sustaining. If this is not possible, it could put over 8,000 UK jobs at risk. While a Government spokesperson said they are committed to “supporting a sustainable, long-term future for steel making in the UK”, they labelled this as ultimately a “commercial decision for the company”.
Mr Kinnock outlined that Business Secretary Rt Hon Kwasi Kwarteng who is leading the negotiations, is “playing his cards very close to his chest”. It is still unclear exactly what a future deal could entail, with questions remaining over how far the Government would get involved to save the steel industry. It is also highly likely that any deal will come with conditions attached and decarbonisation is a crucial part of this. “We really hope that Tata Steel will come forward with a strategy that the British Government wishes to support” said the Aberavon MP last week.
Yet Mr Kinnock was clear that any support needs to be substantial. While he was unwilling to put a number on this, he explained that this needs to be based on steel’s pivotal role in an economic recovery. “It is a foundational industry that cuts across the automotive, housing, and transport industries” he said, “you name it, steel is there”. Due to steel’s use across all parts of the manufacturing sector, Mr Kinnock explained that any investment will lead to a multiplier effect, bringing an excellent return for the British taxpayer. It is this that he has tried to hammer home to those at the negotiating table.
“It is absolutely clear that if the Government is at all serious about its levelling up agenda, you cannot have a post-pandemic economic recovery without a strong and healthy steel industry. It has to be the basis for a modern, manufacturing renaissance in this country. ”
A punishing policy environment
In recent decades, UK steel manufacturers have been hit hard by international competitors who have been able to undercut prices with dumping practices and substantial government subsidies. Yet Mr Kinnock was clear that for many years, the Government has instead hindered the steel industry with a “litany of missed opportunities”.
“We have had 10 years of indifference from successive UK Governments” he said. “We have had years of a policy environment that is simply not conducive to attracting investment”.
While inside the European Union (EU), the UK continued to block the European Commission’s stronger anti-dumping measures against international steel. Domestic business rates also make investing in new machinery more costly and high electricity costs continue to make electrification an unappealing alternative.
“You will never push a decarbonisation agenda in the steel industry unless you can do something about electricity costs. Electric arc furnaces use electricity. And yet, they have done nothing about that” said Mr Kinnock. Compared to European counterparts in France and Germany, higher electricity costs put UK steel already at a competitive disadvantage.
Now officially outside of the EU, steel manufacturers in the UK could also soon face significant tariffs. The expiration of an EU safeguard measure in June would mean that every tonne of steel exported to the EU above a certain quota could be hit by a 25 per cent tariff. Devastatingly, this also includes any exports to Northern Ireland.
International steel tariffs In March 2018, President Trump exercised Section 232 of the Trade Expansion Act 1962 to impose a 25 per cent tariff on steel imports, with certain countries such as China, Turkey and Brazil hit with a minimum 53 per cent tariff. This became impossible for certain manufacturers to overcome and so remaining steel began to be exported outside of the United States. As the next biggest trading block, this became a concern for the EU who feared domestic steel prices would be driven down by surplus stocks coming into the EU instead of the US. To offset this, the EU introduced 25 per cent tariffs for third countries on 23 different categories of steel. As the UK became a third country upon leaving the Union on 1st January, 2021, steel manufacturers will have to front this tariff if a deal is not negotiated by the end of a safeguard measure in June.
“We are being hit by the total failure of the British Government to get that issue resolved as part of the broader Brexit negotiations when we had leverage. We could have said we are part of a bigger package and need exemptions on steel. But they just ignored us and failed to step up and that is where I think the betrayal is. ”
It is not right that we receive the same treatment as steel from places such as China or Ukraine, who have “very different market conditions to what we have here with far less open competition and more state subsidies. ” said Mr Kinnock. It is crucial therefore that the UK can renegotiate a fairer deal for domestic steel.
Decarbonisation not deindustrialisation
Forging a new policy environment domestically is also vital to meet any decarbonisation goals and Mr Kinnock was clear that no steel industry could possibly make the move to net-zero without significant government support.
“The steel industry and trade unions are very open to make the transition to a decarbonised net-zero industry. There has to be an adjusting transition to ensure we don’t destroy thousands of jobs. Decarbonisation must not lead to deindustrialisation. ”
Steel manufacturers are already making incredible strides in the path towards sustainability. The South Wales Industrial Cluster, a public-private initiative made up of various partners in the manufacturing sector, is already undertaking leading research on hydrogen, carbon capture and technology utilisation. Similarly, improved climate efficient steel products have allowed cars to become more sustainable than ever before.
For Mr Kinnock, it is this cutting-edge research and development that is under threat, “I worry sometimes that there is a political ideology in the Conservative Party which is really all about financial services and so has neglected our manufacturing sector”. Instead, by supporting industry, the Government can assist the sector’s growth and transition into a sustainable and successful future.
There are numerous options for how to do this and number one on Mr Kinnock’s list is creating a policy environment that attracts investment and development, specifically by bringing down electricity prices. Without this, he fears that Tata and other international steel companies will simply look elsewhere to increase their operations. He explained that as negotiations continue with Tata, a variety of policy changes must reinforce financial aid. “We cannot separate the policy support from the investment, these two go hand in hand. Otherwise, you are throwing money off the bat. ”
For a steel industry hit by price-wars and now a pandemic, these changes cannot come soon enough. It simply needs the support to hold its foundations. And these foundations run deep across the UK, with thousands of steel workers and industrial communities reliant on an industry which politics in the UK has simply left behind. Mr Kinnock was clear “the steel industry has not had it easy and these past five to ten years have been very turbulent times. We need our steel, and to move on this urgently. The Government needs to step up. ”
#WIJInsight #steel #genevieveredgrave #wijnews