UK Steel Industry

Barry Sheerman Excerpts

Monday 29th February 2016 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

The UK steel industry should be identified as a significant strategic sector of the British economy to help to secure our manufacturing strength and to retain the capability and capacity within the supply chain for our vital and productive industrial sectors such as aerospace, automotives and construction.

Given the industry’s importance and the crisis in recent months, with one in six jobs lost since the autumn, the Business, Innovation and Skills Committee made this issue the topic of our first report of the Parliament. We found that the Government were not sufficiently alert to the warning bells being sounded by the UK steel industry. Although the Government had identified the sector as vital, Whitehall did not have effective warning systems in place. The loss of job, skills and capacity in this vital industry is nothing short of a national tragedy. That has spanned more than 40 years, but on their watch, this Government should have been much more proactive in considering the retention of the existing steel capability and employment levels, rather than redeploying hard-working and skilled people to alternative jobs that are often less productive and lower earning, and losing forever these key industrial assets.

The Select Committee also found that UK Governments needed to do more at an EU level to prevent the dumping of Chinese steel—an issue that has rightly been mentioned throughout the debate and that is explicitly mentioned in the motion. It is of central importance and I shall return to it later.

At the steel summit in October, industry made five reasonable policy requests on matters such as energy costs, business rates, procurement, anti-dumping measures, and the industrial emissions directive. In the letter to me that accompanied the Government’s response to the Select Committee’s report, the Minister for Small Business, Industry and Enterprise stated:

“We have delivered on four of the five asks of UK steel and on Business rates we await the conclusions of the Chancellor’s review”.

In his opening remarks, the Secretary of State said virtually the same thing. In the body of the Government response to our report, the Government said that it has been

“unceasing in its efforts to deliver”

on those five asks, and pledged to

“continue to do all it can in the coming weeks and months to ensure a healthy and sustainable future for UK steel.”

Those are powerful words and phrases, yet I regret that they are untrue, and it is wrong—disingenuous, even—to say that the Government have delivered on four out of the five asks.

For example, on procurement it is true and very welcome that the Government have changed the guidelines to allow for more local content. However—unless the Minister can correct me—no orders have yet been received in steel plants on the back of that change to the guidelines, and they also fail to include so-called publicly enabled procurement projects. That means that Hinkley Point, one of the largest construction projects that this country has ever seen, which requires more than 200,000 tonnes of steel, more than 600,000 embedment plates, and large quantities of structural steelwork, is not subject to the guidelines; and nor is the massive rolling stock programme. Will the Minister outline any new orders won on the back of those changes? Will she commit to looking at whether publicly enabled procurement projects can be considered within those guidelines?

The biggest issue regarding not only the viability of the UK steel industry but the survival of the entire global steel industry is that of cheap Chinese steel being unleashed on the rest of the world. The Committee’s report acknowledged that the scale of the problem should not be underestimated. We fully accept that even if the Government were able to deliver immediately and in full on all the other asks, the future of the UK steel industry would remain in doubt unless effective action could be taken at an international level to withstand the onslaught of cheap Chinese steel.

China has far too much supply in the face of sharply shrinking domestic demand. Total Chinese steel production is 1.17 billion tonnes, which is more than double that of the four next largest producers—Japan, India, the US and Russia—combined. Chinese surplus capacity in steelmaking is bigger than the entire steel production of the United States, Germany and Japan combined. Despite the rhetoric of Chinese leaders about reducing surplus capacity, Chinese steel production increased last year.

Why would China want to reduce steel output? The closure of local steel mills would throw something like 400,000 steelmakers out of work, putting at risk social order and the ability of the Chinese party apparatus to control matters. Steel mills in China are concerned that they will lose market share and have to spend increased capital to start production again. It is far easier to keep operations going now. Chinese banks are urging mills to keep going so that they do not have to make provision for bad loans. Therefore, when considered in terms of the geopolitical situation and the domestic environment, the risk to the Chinese political, social and banking systems as a result of reducing steel capacity means that it is naive of policymakers in the west to believe that the Chinese will allow it to happen willingly. It is therefore imperative that policymakers in the west undertake a concerted and co-ordinated effort to withstand this illegal Chinese dumping. This is not protectionism. The steel market does not have effective competition, and it is being distorted to the point of destruction by a powerful monopolistic power that is immune to the normal pressures of market forces.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Some of us want a proper relationship with the Chinese economy and concede that partnership in some things is very valuable. However, this is about the power of the Chinese economy, and even though my constituency does not depend on British steel, our leading agricultural chemical companies in the world, such as Syngenta, are being taken over—overnight it seems—by a Chinese conglomerate that is really the Chinese Government strategically plotting a course worldwide.

[Mr Wright]

My hon. Friend is right, and that point was mentioned earlier in the debate. This is about commodities in general, not just steel, and the enormous surplus capacity in other things such as phosphates is incredibly important. It is therefore vital that we have tougher EU action to ensure a level playing field, support scrapping the lesser duty rule, and carefully consider China’s market economic status. Given the Government’s rhetoric that they will be “unceasing” in their efforts and will

“continue to do all it can”

to safeguard UK steel, those steps are the very least one could expect.

The Committee’s report acknowledged the Minister’s success in changing the UK’s stance to vote in favour of the extension on wire rod, but lifting the lesser duty rule has been ruled out by the Government. In Committee earlier this month, the Secretary of State will recall that I asked whether he would change the UK Government’s position within the Commission on the lesser duty rule, to safeguard the British steel industry as much as possible. He replied that he would not, and he has repeated that tonight, stating that he needs to consider the “impact overall” on British industry and British jobs, particularly in terms of duties imposed.

Nobody would want a protectionist arms race to escalate throughout the economy, but the Minister and the Secretary of State must surely realise that the British steel industry—alongside many other European steel producers—faces an existential threat that is based on a grossly distorted and failing market. This is not about imposing additional duties or tariffs elsewhere on British manufacturing; it is a request, a plea, for a co-ordinated response. The UK steel industry is on its knees. This proud sector, which should be powering the future of British manufacturing, is pleading with the Government to help and to make sure that we have a sustainable future for the steel industry in this country.