Steel 2020: The Future of the UK’s Steel Industry
It’s a vital industry, invented in the UK, but
its recent story is characterised by highly unpredictable commodity prices and
sharp changes in consumer demand. Weak economic
growth worldwide following the financial crisis resulted in a surplus of steel
and falling commodity prices - with grave consequences for prices, forcing them
to a 12 year low in 2015. The UK is a relatively small player in the
international steel market and therefore particularly vulnerable to trends of
this kind. As a result, economic output from the UK steel industry declined by
a staggering 40% in 2015 and 2016.
With the shuttering of the Redcar steel works on Teesside, the
ongoing struggles of Tata Steel in its various operations around the UK
(especially in in Port Talbot), and the demise of Caparo in 2015, the industry
has been trapped in a state of flux. Famous old brands have disappeared and new
names such as Tata Steel, Liberty, and Thai-based Sahaviriya Steel Industries
have entered into our consciousness – and sometimes vanished again. The UK
steel industry looked to be approaching a fork in the road.
Fortunately, some years on from the gloomy days of 2015, the
outlook for UK steel is more positive. Concessions once considered unthinkable
have been agreed by a newly-invigorated workforce. Now Brexit has finally taken
place the government is looking more closely at industrial strategy, with steel
appearing near the top of the agenda. The official go-ahead for ambitious high
speed rail project HS2 has been welcomed by the UK
Steel Director General, who suggested that it should be used to support high-quality UK steel products.
It is reckoned that HS2 will require two million
tonnes of steel over the coming decade - and the country’s steel producers are
well placed to supply material for the new tracks, rolling stock, tunnels,
bridges and other crucial components. It has been estimated that using UK made
steel for HS2 would bring 2000 jobs and generate around £1.5 billion to the UK
economy. The most encouraging indication, though, is the new government’s
recognition of how limiting high energy prices can be for UK steel’s prospects,
especially when it comes to exports.
There is some talk of new interconnectors to
enable lower wholesale energy prices, which we are sure will be warmly received
across the whole industry. Energy
prices paid by British steel producers typically stand at roughly £50 per
megawatt-hour (MWh) - considerably higher than the £31/MWh in Germany and
£28/MWh paid in France. Steel production is a massively energy intensive undertaking
with electricity costs taking up to 20% of the expense of transforming the
basic raw materials into steel. For some steelmakers, energy represents an even
larger chunk of operating costs than labour.
As a leading steel stockholder in Liverpool (a business that
serves the Northwest region but also the UK as a whole), we can say we’re
optimistic about the future of UK steel. Whatever happens, we’ll keep on
investing in the best people and technology to ensure that we remain in a
strong position to offer the highest quality material (and our renowned steel
fabrication services) to
clients. We also aim to cover the latest goings-on affecting UK steel in our
future blog posts. So if you’re interested in our take on what’s happening, please
return to the website every now and then for an update!
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