Steel crisis: why are UK steel workers losing their jobs, and what is China’s part in it?

Britain’s steelworks are cutting jobs and folding under pressure from a flood of cheap Chinese imports and high energy costs.

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What’s going on?

As steel plants across the UK are closing, it looks like the beginning of the end of Britain’s steelmaking industry. In the Seventies, more than 200,000 people were employed in the UK steel sector, but the number is now at 30,000. Unions warn that one in six of the remaining jobs are now precarious.

Which plants are affected, and how many will lose their jobs?

Tata Steel, an Indian steel company owner, confirmed plans back in January to cut 1,050 UK jobs, including 750 at Port Talbot, the UK's biggest steelworks. The government is currently considering all options for the Port Talbot steel plant, which the company plans to sell. And another one of the UK’s biggest steelmaking plants, at Redcar on Teesside – owned by the Thai company SSI – went into liquidation last year after a century of production, with the loss of 2,200 jobs. Last year, Tata Steel also announced nearly 1,200 job losses at its plants in Scunthorpe and Lanarkshire. This comes on top of 720 jobs lost at the firm's Rotherham plant in July. Caparo Industries, the steel products company that is part of Labour peer Lord Paul's Caparo Group, has filed for administration, putting 1,700 more jobs in British steelmaking at risk.

Why is this happening?

The international price of steel has plummeted over the past year, from $500 (£330) a tonne to about $280 by September 2015, a 45 per cent drop in just 12 months – the lowest level in over a decade. This is because steel markets around the world are oversupplied relative to current demand. Cheap raw materials also contribute to this.

What’s it got to do with China?

The commodity has been caught up in China’s market crash – the country supplies about half of the 1.6 billion tonnes of steel made worldwide per year, and its steel exports have been growing as its economy slows. In China, the state subsidises its steel production because of its huge scale, which sustains its domestic production, increases the global supply of the raw material iron ore for steelmaking, and results in prices falling even lower. In July 2015, it was reported that steel was cheaper per tonne than cabbage as part of the fallout from China’s share market plunge. The flood of excess cheap Chinese steel has had a devastating effect on UK steel manufacturers. Kevin Brennan, the Labour MP and shadow business minister, has condemned this as “blatant Chinese dumping” on the global market and on “our shores”.

Why is the UK affected by Chinese steel?

UK steelmakers condemn the British government for failing to introduce protectionist measures against cheap Chinese imports. The government’s defence is that it cannot intervene in the global steel industry. Replying to an urgent question on British steelmaking in the Commons, Business Secretary Sajid Javid insisted: “No government can change the price of steel in the global market.” The government stresses the need to work within the EU to come up with a plan to take on cheap Chinese steel.

But the government seems quite keen on China at the moment?

Indeed. It must have been galling for those who have lost their jobs due to Chinese steel to see its president Xi Jinping on a state visit to the UK at the end of last year, welcomed to London by the Queen, the Duke of Edinburgh and David Cameron during a ceremony in Horse Guards Parade, and with a red carpet rolled out for him at No 10. Plus George Osborne went on a much-publicised jolly tour of China last year. Cameron said he would bring up the subject of steel with the Chinese president during his visit, but not much seems to have come of that.

Is it all China’s fault?

No. UK steel producers also complain about energy costs being higher in Britain than elsewhere, as well as the extra costs of environmental levies and high business rates. They feel that if these were relaxed, the industry would be hit less hard. The government points out that the steel industry crisis has not only been caused by China, citing the recession in Brazil, for example.

Anoosh Chakelian is the New Statesman’s Britain editor.