Britain’s steel industry is on the brink of collapse and this is mainly because Tata Steel is selling off its UK business.
Why? — because it’s just too expensive to produce and no one is buying it. The reasons for this were outlined by Business Insider extensively over the last week.
And as a buyer of a British steel plant, it looks like a pretty crappy deal. Port Talbot, one of the UK’s biggest steel plants, loses £1 million a day.
Rakesh Arora, an analyst at Macquarie, told the Financial Times last week 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.
However, Sanjeev Gupta, founder of commodities group Liberty House said he is looking at buying Port Talbot in Wales where 4,000 jobs are at risk. Tata Steel employs around 14,000 people in the UK in total.
But the catch? The government would have to help out with a whole list of concessions for him and his group Liberty House — which has an annual turnover of $6 billion — to part with the cash. Gupta already bought two smaller Scottish steel plants from Tata in March.
Gupta told the Financial Times that the following needs to happen in order for his company to buy Port Talbot:
- Remove pension liabilities.
- Remove environmental liabilities.
- Lower power costs for steel plants.
“Either we want a clean asset, which is going to be tough, or we want support to broker a deal that’s going to be equitable,” said Gupta to the FT.
“If they eliminated taxes on that we’d be the most competitive power provider for steel in the world. We could make power as cheaply as anybody.”
His demands aren’t out of this world though — the government has floated these ideas to help find a buyer, last week.
Gareth Stace, director of trade body UK Steel also told the FT that this was a”very promising step that we’ve got a good, credible investor looking at the business with a view to taking it forward.”
“But those investors won’t be looking at the long term unless they see firmer government commitment to the steel sector.”