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A buyer for British Steel is welcome but what’s Jingye’s strategy?

It’s hard to see why the Chinese firm wants to take over a loss-making business in a tough market.

 

Half the woes for steelmakers in Britain derive from dumping into world markets by Chinese producers, or so we have been told for a couple of decades. So it is a strange sort of rescue for British Steel that ownership should pass to a little-known Chinese conglomerate, Jingye, offering a vague promise to invest a large sum.

Any buyer is better than none, of course, since the effects of irreversible closure of the Scunthorpe steelworks would be appalling. Top of the list would be 4,000 jobs, with another 20,000 in the supply chain. Then there would be the huge environmental clean-up costs.

Jingye counts as a more credible owner than Greybull Capital, the private equity outfit that took British Steel into administration. Yet it is still hard to understand why a Chinese group, which is only the world’s 37th largest producer of steel, wants to own a loss-making producer on the other side of the world.

 

Tata Steel couldn’t make financial sense of what it called its “long products” business, so gave it away to Greybull for £1 in 2016. Industry conditions haven’t notably improved for high-cost European producers since then. The price of iron ore, of the two key raw materials, is high. And complaints about energy and environmental costs, the other half of the industry’s troubles, are constant.

Perhaps Jingye wants overseas assets to balance the volatility in its home market. Or perhaps it calculates that a purchase of British Steel will open up opportunities to export to the UK some of its current products. But those theories are speculative. This £50m purchase may just be a hopeful punt in which the downside risks are deemed tolerable.

 

Read More – www.theguardian.com