Britain is pulling some desperate moves to stop a steel industry extinction
On Sunday, Britain's business secretary Sajid Javid outlined some radical incentive plans to try and get someone to buy Tata Steel, which is putting up its entire UK business up for sale.
This includes:
- Government help on pension liabilities - meaning whoever buys Tata's UK business will get government help on paying pensions for staff.
- Government help on energy costs - which means the taxpayer will be somewhat funding some of the industry's energy bills.
- Asking public sector companies to buy British steel - even if the steel offered is not the cheapest offered during the tender process.
"Tata will issue an offer document very soon. Alongside that, the UK government know - I've known for a while - that we're also going to have to offer support to clinch that buyer and give that steel plant a long-term, viable future," said Javid on BBC's The Andrew Marr Show.
"No one is talking about nationalisation of pension schemes but it is something I absolutely recognise is a challenge."
He added that any buyer would want "to look at what I have referred to internally as the 'three P's' - plant, pensions and power supply."
He also highlighted how:
"I don't think nationalisation is a solution to this. Having said that, I also think it wouldn't be prudent to rule anything out at this stage, but I think that nationalisation is rarely an answer in these situations."
Thousands of jobs are at risk after Tata announced it would sell it's UK business. Tata directly employs 15,000 workers in Britain and its main plants are in Port Talbot, Rotherham, Corby and Shotton.
Britain is in the worst spot right now when it comes to selling steel. The country's steel is too expensive. There is too much of it. And no one wants to buy it.
Rakesh Arora, an analyst at Macquarie, told the Financial Times on Thursday that producing steel in the UK "makes no sense actually:"
Steel's labour costs there [the UK] at about $200 per tonne of production, compared with as little as $10 for its Chinese peers. "That gap was too difficult to bridge with the best of operating efficiencies," Arora said.
Considering prices are around £285 per tonne for steel, according to pricing agency Platts, you can see how Chinese steel companies can remain profitable while British companies struggle to make ends meet. In fact, Britain's biggest steelworks Port Talbot is said to be losing around £1 million per day.