Wednesday, 30 June 2021
For Immediate Release
UK Steel: Joe Morris, 07920040510
Commenting on the extensions of the UK’s Steel Safeguards, UK Steel Director-General, Gareth Stace said:
“The Prime Minister has said that he wants to take back control and today he has done just that and avoided a retreat from investment in our steelmaking, a reduction in the well-paid jobs that are part of the social fabric across the country and hampering any progress for Government of levelling up.
“Today the UK steel sector applauds the Prime Minister, Boris Johnson and Trade Secretary, Liz Truss, for standing up for steel, taking back control and showing that where there is a will, there is a way. This Government has today demonstrated its commitment to the steel sector, by bringing forward emergency measures to ensure free and fair trade is maintained. The Government’s interventions will prevent an anticipated wave of overseas steel flooding our market, that would have cost jobs, investment, and our ability to decarbonise as a sector, threatening the UK’s road to net-zero.
“To have removed steel import restrictions tomorrow would have cost the sector hundreds of millions per year, as a result of increased import penetration and reduced market share for UK producers. This cost would be equivalent to 50% of the annual capital investment of steel producers, or 2,500 employees - 8% of the total employment in the sector.
“Today’s bold move today by Ministers, will safeguard the sector’s ability to innovate, modernise and decarbonise; something that the sector is currently working closely with Business Secretary, Kwasi Kwarteng to do through the Steel Council. The steel sector still faces challenges; crippling electricity costs and a difficult procurement environment and will continue to work with government to address these, but without the action taken by Government today, the sector would have faced a potentially existential threat.
“With UK steel exports to the EU remaining capped at 2015-2017 levels and a blanket 25% tariff going into the US, scope for growth in our two major export markets is very limited, making our Steel Safeguards doubly important. It is vital we now work with partners like the EU, and the US to address the underlying issues that are destabilising global steel markets. Safeguards are not a long-term solution, and the ultimate goal here is global market for steel where we all play by the same rules.
“The steel sector will continue to work with the Government in creating the best possible investment environment for modern steel production in the UK. An agenda for steel is an agenda for a UK that is levelling up and decarbonising.”
ENDS
Steel Safeguards Background:
- The UK Government have brought forward measures to overrule the TRA and lead to the maintenance of 15 product categories.
- The removal of 9 product categories, as recommended by the TRA would have left half of steel products exposed to uncontrolled surges in imports.
- The UK has had steel safeguards as part of the EU since 2018, these were transitioned into UK law in January 2021.
- The measures were introduced to limit further increases in imports because of a dysfunctional global trading environment for steel namely: global overcapacity of steel, trade diversions resulting from US introduction of steel tariffs, and increased use of trade defence measures globally.
- The measures allow for tariff-free imports equivalent to 115% of historic levels, with further relaxations every year. This provides a balance between different industrial interests.
- The EU has proposed extending its safeguard measures across all product categories and the US is virtually certain to retain Section 232 tariffs, increasing the likelihood of trade diversion to the UK if no action had been taken.
- The EU and US are also in bilateral negotiations to end tariffs on steel and aluminium products with a deadline of the end of the year, leaving UK producers in an additionally disadvantaged position.
- UK Steel’s estimate assumed that importers gained 10% of market share as a result of safeguards being removed on nine product categories, this could result in a loss of £103 million in profitability, taking into account the margin impact of both the reduction in UK sales and the likely downward pressure on prices.
- This would be equivalent to the wage bill of 2,574 workers, whose jobs would be at risk, let alone the impact on indirect employment.
- Such a drop in profits would also likely result in a sharp contraction in investment on a scale of £100 million, as producers will have to focus on the bare minimum statutory and essential replacement as opposed to value-adding investment.
Notes:
About UK Steel: UK Steel, a division of Make UK, is the trade association for the UK steel industry. It represents all the country’s steelmakers and a large number of downstream steel processors.
UK steel in numbers:
- Produces 7 million tonnes of crude steel a year, around 70% of the UK’s annual requirement (annual demand of 10.2MT used rather than COVID impacted 2020 figure)
- Employs 33,700 people directly in the UK and supports a further 42,000 in supply chains
- The median steel sector salary is £34,299, 33% higher than the UK national median and 45% higher than the regional median in Wales, and Yorkshire & Humberside where its jobs are concentrated
- Makes a £2.1 billion direct contribution to UK GDP and supports a further £2.7 billion
- Makes a £1.7 billion direct contribution to the UK’s balance of trade
- 96% of steel used in construction and infrastructure in the UK is recovered and recycled to be used again and again