Chinese firm rescues British metallurgy?

The threat of a cataclysm in the troubled UK steel industry - the collapse of the second largest producer British Steel - has now been averted.

Chinese steelmaker Jingye has agreed to buy the sick company, the UK government confirmed today (Nov 11), ending weeks of uncertainty during which it struggled to find a buyer. While the deal still faces regulatory hurdles, if concluded, it would protect thousands of jobs in the UK, most notably at British Steel's Scunthorpe sites in Lincolnshire. And it will bring stability to the firm, which is facing turmoil as the steel industry faces a host of international trade challenges, not least due to Brexit.

“While there is still a lot of work to be done, today's announcement is a huge obstacle to achieving a sustainable future for this cornerstone of UK industry,” said Gareth Stays of UK Steel, an industry group.

For months, the fate of British Steel and its thousands of jobs was uncertain. Impacted by the Brexit-related slowdown in demand, British Steel was forced to liquidate in May. The UK has been looking for a buyer for the ailing firm, but has yet to find one. Recent negotiations to sell the Ataer business, the investment arm of Turkey's military pension plan, have failed.

Trade groups expressed relief at the prospect of a long-term investment. “This is a real milestone in the campaign to ensure the long-term future of British Steel,” said Steve Turner of Unite, a UK and Irish trading group. “Local union representatives met with officials from Jingye and received positive assurances that the company is committed to British Steel's long-term future and is willing to invest heavily.”

But the deal doesn't solve all of the company's problems. To remain competitive in a tough trading environment, British Steel may still need to cut costs.

These were difficult years for the metallurgical industry. A wave of cheap imports from China has swept the market, with Chinese steel exports growing by almost 350% between 2009 and 2019, according to the US International Trade Administration. And the continually delayed Brexit has made it nearly impossible for buyers to anticipate the tariffs metal products will face when crossing the border. Rather than face such uncertainty, many customers have cut their orders.

The Jingye deal could also raise concerns about China's growing influence. Chinese investment in Europe has skyrocketed over the past ten