G20 should move fast on steel industry

G20 should move fast on steel industry

Government and industry officials from G20 countries who have gathered in Paris for talks on the steel industry will need to move fast to prevent more steel plant closures and community catastrophes according to the head of UK Steel.

The ‘Global Forum on Excess Capacity in the Steel Sector’, set up to tackle the over-production of steel following the G20 summit in China, is meeting behind closed doors in the French capital a year after the closure of the Redcar works which sparked the start of a steel crisis in the UK.

In the twelve months since the closure of Redcar, with the loss of 2,000 jobs, the US and the EU have erected trade barriers in an effort to prevent unfairly traded Chinese steel, made and sold at below the cost of production, flooding markets and distorting competition leading to further pressure on the steel industry across the UK.

However, according to UK Steel, although these measures - with the support of the UK Government - have had some impact, the source of the problem remains stubbornly familiar.

Gareth Stace, Director of UK Steel, said: “We welcome the G20 commitment to launch the Global Forum on Excess Capacity in the Steel Sectorto address overcapacity in our industry. It is crucial that this new Forum moves quickly and has real bite, to avoid replicating mistakes with previous forums, all of which proved ineffective.

“The Global Forum for Steel must address the source of the problem and ensure China is cutting its net steel-making capacity. And we need a clear system for demonstrating both the pace and extent of this.

“A real cut in steel capacity, most notably in China, is necessary as opposed to the closing of so called ‘zombie sites’, while at the same time opening bigger facilities elsewhere that actually add to total capacity and exacerbate the current crisis.

“The crisis is continuing and can be seen in the predicted reduction of 30% in steel production output in 2016 compared with 2015 (2015, 10.9mt, 2016, estimated at 7.6mt with UK demand expected to be stable at approximately 10.4mt). This is capacity, communities, skills and livelihoods that will struggle to recover. Government must ensure that this worrying trend comes to a halt and that it uses all the tools at its disposal to give this strategically vital industry a positive long-term future.

“Whilst our sector enjoys zero tariff status in many economic regions around the world, we have also seen a rapid rise in trade defence instruments being used to address regional problems of unfair trade. We all know that this is a much-needed short-term reaction to ensure a fair and level playing field. However, we must feel comfortable that we are actually working through a plan of global action that ensures TDIs are not needed.

“In the UK and across Europe we have seen employers, trade unions and politicians come together and agree on the extent and cause of the problem, the need to address it and importantly agreeing on the actions that need to be taken.

“Although we have seen global steel prices increase slightly, but from a significantly low base, our problem as a global sector is that the attention of politicians moves on to other issues and problems. This potentially leaves us to slide back to the deeper crisis we saw only a few short months ago. As fundamentally, for the sector we know that very little has changed in terms of the causes of the global problem. Global utilisation still stands at 70% or below and we are no seeing any significant rise in demand.”