When Mao Zedong launched the Great Leap Forward in 1957, the goal was to overtake the UK in steel output within 15 years. More than 60 years later a Chinese firm says that it wants to take control of much of what is left of the British steel industry, after Jingye Steel made a £50 million ($64.39 million) offer for British Steel, one of the few local survivors in the sector.
In 1957 China’s steel output was just 5.35 million tonnes, compared to the UK’s 22 million, and it ended up taking 20 years to pass the UK in production (23.7 million tonnes to 20.4 million in 1977).
But in fact output at British steelmakers had peaked as far back as 1970 and the numbers today make for completely different reading: last year Jingye alone made more steel (11 million tonnes) than the UK’s much reduced 7 million total.
Reactions to Jingye’s bid in Britain have been mixed. First there is sheer relief that 4,000 jobs will be saved at the main plant in Scunthorpe and as many as 20,000 more in the wider supply chain. The Grimsby Telegraph, a newspaper from a town near the plant, reported how the news was welcomed locally, not least in Mulligan’s Sports Bar, where patrons found out about the sale when the Chinese delegation turned up and bought everyone a drink.
Others have pointed out that the rescuers share some of the responsibility for the desperate conditions in the sector, including the former transport secretary Andrew Adonis, who also blamed Conservative governments for failing to stop Chinese firms from dumping cheap steel into the market.
That led to the “bargain basement sale” of British Steel’s surviving assets, he complained.
In 2016 the Conservative government opposed EU tariffs against Chinese producers, who were accused of selling excess domestic capacity via ultra-cheap exports. In the same year British Steel was sold for £1 to private equity group Greybull Capital, which promised a further £20 million in investment.
Jingye’s commitment is of a different order of magnitude, saying it will invest £1.2 billion over the coming decade, protecting thousands of jobs clustered around Scunthorpe, Teesside and Workington in the north of England. But UK newspapers have still seemed sceptical about the offer, doubting that the Chinese will deliver.
According to the Financial Times, Jingye plans to refurbish the blast furnaces and boost British Steel’s output from 2.5 million to 3 million tonnes a year. But commentators argue that the buyer – whose plants are based almost entirely in Hebei province – will struggle with the economics of the UK’s steel sector in much the same way as India’s Tata Steel (another previous owner).
Other predictions are that Jingye’s real motive is to import raw steel from China and then slap on a made-in-Britain label, while the Daily Telegraph took aim at a “desperate government” for ignoring “the risks of selling to the Chinese”, including the asset-stripping of the best of British Steel’s technology.
Certainly Jingye will have an eye on the plant at Scunthorpe, which is a specialist in making rail tracks and other “long products” that could be added to its portfolio. This end-use could be a driving force in Jingye’s purchase as China Railway Group is one of its main customers. But it could also prove a problem for the deal’s final approvals – the French government says it might veto the acquisition unless Jingye commits to continuing to supply specialised steel from Hayange, a British Steel plant in France, for the country’s high-speed railway network.
On Thursday there was news of more opposition to the bid, this time from a lobby group of European steelmakers concerned that the UK government must be offering financial sweeteners to Jingye, breaching EU rules on state aid. And the politics of the deal also came in for coverage on Sky News, which thought that the sale was more a case of “political expediency” during the current election campaign, which the governing Conservative Party wants to win by capturing traditional Labour voters from the former industrial north, who mostly voted ‘leave’ during the 2016 Brexit referendum.
The deal marks another roll of the dice for Li Ganpo who founded Jingye in 1994 having quit a government post. The FT termed that job change the first “in a series of high-risk decisions” Li has made.
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