Tata Steel to Cut 1,200 Jobs in U.K.
21 October 2015 - 7:00AM
Dow Jones News
LONDON—Tata Steel Ltd. on Tuesday blamed imports for its
decision to cut 1,200 jobs in the U.K., echoing a sentiment that
has become the cry of steelmakers around the world.
Shipments from Asia "threaten the future of the entire European
steel industry," said Karl Koehler, chief executive of Tata Steel's
operations on the continent. The Indian company is Europe's second
largest steelmaker.
At the heart of steelmakers' woes is overproduction in China,
which since 2000 has built up massive steelmaking capacity to
supply its appetite for bridges, cars and apartment blocks, and to
offer stable employment in far-flung regions. The country now
produces more steel than any other nation ever has, and its
economic growth is slowing.
Global steel demand is expected to drop to 685.9 million tons
this year from 714 million tons in 2014, according to forecasts
published this month by the World Steel Association. Meanwhile,
Chinese mills are on pace to produce 811 million tons of the metal
this year.
The unsold Chinese steel is being shipped abroad, pushing prices
down. In the first eight months of 2015, Chinese steel exports rose
30% to 64 million tons. That is more steel than any country, save
for Japan, produced during that time.
The benchmark hot-rolled coil price in the U.S. is currently at
$410 per ton, 33% lower than its level on Jan. 1.
Chinese steel officials have said they are moving to curtail
high-cost capacity, but many dispute that their production is the
problem. "Demand is the problem," said Zhang Maohan, a manager for
Maanshan Iron & Steel Co., adding his company exports just a
10th of its 15 million tons annual production. "Once the economy
recovers, there won't be any more oversupply problem," he said.
That isn't how U.S. and European steel executives see things.
"Chinese overproduction is an explosive force which is hurting
everything," said Wolfgang Eder, CEO of Austrian steelmaker
Voetalpine AG.
Tata Steel, U.S. Steel and other steelmakers have called for
increased trade protection. "Import tariffs can be effective," if
they are 20% or 30%, said Robrecht Himpe, a senior executive for
ArcelorMittal and president of the European Steel Association. "But
it's getting urgent to act, because prices are becoming loss-making
all over the world, and that's going to affect plants and
employment."
The Tata Steel layoffs announced Tuesday could signal another
round of job cuts.
The steelmaker said it would shut its steel plate mills in
Scunthorpe, England, and Dalzell and Clydebridge in Scotland, as
well as one of two coke ovens at Scunthorpe. The move would result
in about 900 job losses in Scunthorpe and 270 in Scotland, as well
as a small number of posts at other sites which are part of Tata's
long-products division in Europe.
Tata Steel employs 6,500 people at its long-products division,
which produces rail, rod, plate and other steel products for
construction and excavation companies. The division can produce
more than 4 million metric tons of steel a year, but only produced
3 million tons last year. At Scunthorpe alone, the company employs
about 3,500 people.
Tata Steel said imports of steel plate into Europe have doubled
and imports from China have quadrupled over the past two years,
causing steel prices to fall steeply. At the same time, a stronger
sterling pound has undermined the competitiveness of its exports
into Europe and encouraged more imports to the U.K.
Earlier this week, London-based Caparo Industries PLC initiated
bankruptcy proceedings for 16 of its 20 steel-related businesses, a
move which could potentially affect 1,700 jobs. This follows
Thailand's Sahaviriya Steel Industries PLC's decision last month to
shut its Redcar steel plant in England, resulting in another 1,700
job losses. The month before, Tata said it would partially shut its
Llanwern steelworks in South Wales, resulting in 250 layoffs.
Tony Burke, assistant general secretary of the Unite labor
union, called on the U.K. government to do more to protect the
country's ailing steel industry.
"The U.K. government know[s] what needs to be done and they need
to do it quickly. A failure to act and tackle the dumping of cheap
Chinese steel will spell the end of steel in the U.K.," he
said.
And what happened in the U.K., said Mr. Himpe of ArcelorMittal,
"could be repeated around the world in the coming months."
Write to John W. Miller at john.miller@wsj.com and Alex
MacDonald at alex.macdonald@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 20, 2015 15:45 ET (19:45 GMT)
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