China’s Jingye to buy British Steel

CHINESE steel firm Jingye is buying British Steel’s business and assets, including its steelworks in Scunthorpe, UK. Though reactions are mixed, the sale could be an important step in securing the British company’s UK operations.

Earlier this year rescue talks with the UK Government fell through and British Steel entered insolvency, putting thousands of jobs at risk and leaving the UK steelmaking industry reeling. British Steel, which is continuing to trade and supply to its customers, has been receiving government support to continue operating since May.

According to Gareth Stace, Director General of the trade union UK Steel, British Steel accounts for one-third of the UK’s steel production and it is a major asset to the country. If the country were to lose the company’s production, its manufacturing, construction, and infrastructure capabilities would be left in a “considerably poor state”, he added.

If successful, the deal could save up to 5,000 jobs. According to The Guardian, Jingye anticipates that it will make offers to as many employees across the business as possible. However, the report added that a person with knowledge of the company’s plans said no guarantees could be made until the sale was formally closed.

In addition to its direct employees, the union Unite says there are 20,000 workers in the company’s supply chain.

British Steel could benefit from Jingye’s plans to invest in the company. Jingye is to invest £1.2bn (US$1.54) into British Steel over the next decade. The Guardian reports that investment will include upgrading, lowering emissions, and improving energy efficiency.

The report adds that Jingye has pledged to identify new markets and products for British Steel.

According to BBC News, in the long term Jingye has promised to increase production, but it also warned that costs may need to be cut.

News of the potential sale to Jingye comes after talks with Turkey’s Ataer came to the end of a period of exclusivity.

British Steel business operations will continue as normal until the completion of the sale, whilst the company assists Jingye in planning for the future. The UK Government continues to work with the Official Receiver and Jingye on the next stages of the process.

British Steel and Jingye are working to complete the sale as soon as possible. The sale amount was not disclosed directly, but according to reports it is worth about £50m.

The British Steel assets that Jingye would receive include mills and shares of FN Steel BV, British Steel France Rail SAS, TSP Engineering, and the company’s shares in Redcar Bulk Terminal.

According to The Gaudian, Jingye’s Chairman Li Ganpo said: “We know that this is only the start of the hard work of revitalising British Steel. But we believe that this combination will create a powerful, profitable and sustainable business that will ensure the long-term future of thousands of jobs while producing the innovative high-quality steel products that the world needs.”

The sale of British Steel’s TSP Projects was also announced. The subsidiary which designs and builds rail infrastructure projects will be acquired by SYSTRA. This sale will have no impact on the proposed sale of the remaining portion of British Steel.

Mixed response

Roy Rickhuss, General Secretary of the steelworkers’ trade union Community, said: “We welcome this positive step towards securing British Steel under new ownership. Jingye’s interest rightly demonstrates that they believe that British Steel can have a sustainable future. Jingye are not just potentially acquiring a steel business, they would be taking on a dedicated and skilled workforce, who even through the uncertainty of recent months have been breaking production records to give the business a chance.

 “Whatever government is in place in the coming weeks it is vital that all steps are taken to successfully conclude this process – everyone needs to remain focussed on achieving that outcome to save our steel. Until a deal is completed, all viable options to securing the business should remain on the table.

“Thus far the government has taken the right approach when faced with a vital industrial asset under threat.”

Gareth Stace said: “Today’s announcement is a huge hurdle overcome on the way to delivering a sustainable future for this cornerstone of British industry. A commitment to long-term investment and production in the UK is absolutely essential and naturally must sit at the heart of any purchase that now goes ahead.”

Unite “cautiously” welcomed the news with Assistant General Secretary Steve Turner noting “[T]here have been a series of false dawns in finding a buyer for British Steel and Unite will not be raising any false hopes without seeing detailed plans for the entire business and the ink is dry on the contracts.

“If and when a formal announcement is made, the workforce will begin to breathe a collective sigh of relief.

However, not all those in the industry are as optimistic about this recent announcement. For example, Andrew Adonis, British Labour Party politician, took issue with the potential purchase of British Steel by a Chinese company.

On Twitter, he said: “China destroys British Steel by dumping cheap steel, courtesy of the Cameron/Osborne government which resisted tough EU anti-dumping measures because they were sucking up to President Xi.

“Now it buys the remnants for a pittance.”

In 2016 – after a European Commission investigation confirmed suspicions that Chinese products sold in Europe at heavily dumped prices – the EU imposed anti-dumping tariffs of up to 73.7% on imports of steel products from China. Dumping is a practice in which countries or companies export products for a price that is lower than those of domestic producers, which can drive competitors out of business.