Tata Steel has slashed the value of its struggling UK business by £862m, weeks after unveiling plans to make 1,200 workers redundant.
However, the company – whose offer of £3m to help sacked steelworkers in Scunthorpe has been described by unions as “woefully inadequate” – also reported a pre-tax profit of £302m on Thursday for the three months to the end of September.
Tata Steel, owned by the giant Indian conglomerate Tata, made an underlying loss of £24m in Europe, but this was more than offset by a £475m underlying profit in India, boosted by £280m of asset sales.
Cheap Chinese steel imports have forced down the price of European hot rolled coil – a bellwether of the region’s industry. The price has slumped from €417.50 (£298) per tonne this time last year to €335 per tonne, a fall of nearly 20%, according to Steelfirst.com.
Tata said its UK business had buckled under the weight of challenges including the dumping of cheap steel on to the market by China. It said British steelmaking was facing a “structurally challenging environment of weak domestic manufacturing demand, surging imports, a strong pound and steep regulatory and business costs”.
Industry sources said the £862m writedown, the third in as many years, meant the UK business of Tata Steel was practically worthless for accounting purposes.
Its chief executive, Karl-Ulrich Köhler, called on the government to do more to prevent “dumped imports, including from countries that subsidise their steelmakers”.
Gareth Stace, director of the industry trade body UK Steel, urged the government to speed up efforts to pull the sector back from the brink.
“Conditions in the steel sector remain perilous with a perfect storm of high energy costs, a strong currency and unfair trade,” he said. “Measures have been promised to provide the sector with breathing space through the current crisis, but we need these within weeks, not months, if we are to give companies a fighting chance on a level playing field.”
The twin pleas to politicians come before an emergency meeting of European Union ministers to be held on Monday to discuss the steel crisis.
The business minister Sajid Javid, who will represent the UK at the summit in Brussels, said he was determined that the meeting should lead “to swift action, not just [be] a talking shop”.
The small-business minister, Anna Soubry, hinted last week that the government planned to address those issues to prevent further job losses.
But the industry is also feeling the effect of the strong pound and a huge increase in cheap steel coming from China, where heavily subsidised companies are dumping their product in Europe at bargain basement prices amid falling domestic demand.
Chinese steel imports from January to June this year were 125% higher than for the same period in 2012, while China now supplies nearly a third of all European steel imports.
Measures to shore up European steelmakers against the flood of Chinese steel are likely to dominate the talks in Brussels, amid suggestions that countries such as the US are doing more to protect their industries.
The long-term malaise affecting the industry has seen Tata Steel write down the value of its UK business three times since it bought Corus – including the remnants of British Steel – for £4.3bn in 2007.
The company failed in a bid to sell its Long Products unit to US firm Klesch Group earlier this year after its billionaire head, Gary Klesch, walked away, blaming the UK government’s failure to deal with high energy costs and Chinese steel imports.
The Unite union is in the midst of a 45-day consultation process aimed at reducing Tata Steel’s 1,200 planned job losses, affecting plants in Scunthorpe and Lanarkshire.
“We’re getting into the nitty gritty of those discussions and will be coming forward with alternatives,” said a spokesman.
“It needs action from the government but it also needs the company to hold its nerve. The danger is that you get rid of valuable skills and expertise.”
Tata, which also owns Jaguar Land Rover, has pledged to provide £3m to help workers and business affected by around 900 job losses in Scunthorpe. The government said it would provide an additional £6m.
But the total sum of £9m has been described as “woefully inadequate” by Unite’s assistant general secretary Tony Burke.
Source: http://www.theguardian.com/