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Britain urges China to speed up on cutting steel capacity

By Reuters - Apr 09,2016 - Last updated at Apr 09,2016

In this photo taken on April 7, partly demolished buildings are seen at the closed Shougang Capital Iron and Steel plant in Beijing. The plant closed in 2011 (AFP photo)

LONDON/BEIJING — Britain asked China on Saturday to hurry up in tackling overcapacity in its steel industry, hoping to stem the flood of cheap imports into Europe which India's Tata Steel has blamed for its decision to pull out of the United Kingdom, putting 15,000 jobs at risk.

Tata put its entire UK business up for sale last month, including its flagship production plant at Port Talbot in south Wales, saying it could no longer endure mounting losses caused by increased imports to Europe from countries like China, high manufacturing costs and domestic market weakness.

"I urged China to accelerate its efforts to reduce levels of steel production," Britain's Foreign Secretary Philip Hammond said in a statement issued after he met with his Chinese counterpart Wang Yi in Beijing.

"The UK's focus is on finding a long-term sustainable future for steelmaking at Port Talbot and across the UK and I welcomed the potential interest of Chinese companies in investment in UK steelmaking," Hammond added.

The global steel industry is suffering from overcapacity as a slowdown in growth in the Chinese economy has reduced domestic demand.

China, which produces half of the world's steel, as well as Russia have responded by diverting more of their output to markets like Europe, sending prices plummeting.

The European Union opened three anti-dumping investigations into Chinese steel products in February and imposed new duties on imports after the European steel industry said thousands of jobs were at stake.

China said earlier on Saturday that plans to shut steel mills over the next five years would cut capacity to an estimated 1.13 billion tonnes by 2020, which is still far in excess of the country's needs.

Britain said last week that UK steel producers must be considered for infrastructure and other government contracts involving steel supplies, as part of plans to find a long-term solution to a crisis in the industry.

As the government looks for ways to support domestic steel producers, Prime Minister David Cameron said there was no guarantee of a buyer for Britain's biggest steel producer, and that a state takeover was not the answer.

Under its support measures, the government will create an approved supplier list for steel companies wanting to bid for public sector projects, such as Britain's £55 million ($78.25 million) high-speed rail link, which will need 2 million tonnes of steel.

"By changing the procurement rules on these major infrastructure projects we are backing the future of UK steel — opening up significant opportunities for UK suppliers and allowing them to compete more effectively with international companies," Business Secretary SajidJavid said in a statement.

The introduction of measures to ensure British steelmakers are considered for government contracts could take six to nine months, a spokeswoman for Javid's department said.

The government has faced criticism over its response to Tata's decision to sell its UK plant in south Wales, which employs 15,000, with opposition politicians saying it was "asleep at the wheel".

The government has said it is working to broker a deal with potential buyers.

Liberty House Group, which produces steel in Britain, has begun talks with the government over a potential partnership but does not want to buy all of Tata's UK operations, its Executive Chairman Sanjeev Gupta was quoted as saying by the Sunday Telegraph.

Javid told the BBC he would not talk about specific offers but said he wanted to find a buyer for the whole business and the government would engage with any willing and serious buyer.

He added that the government was looking at how it could help with issues such as Tata's pension burden and costly energy supplies.

"These are the kind of things we have already thought of, we have already started working on and what I hope is that you will have the offer document from Tata, overlay on top of the help the British government can provide and then you have the makings of a successful deal," he elaborated.

Cheap Chinese imports have hit Britain's steel industry. Britain imported 826,000 tonnes of Chinese steel in 2015, up from 361,000 two years earlier, according to the International Steel Statistic bureau.

Cameron has said he wants Britain and China to work together to tackle overcapacity in steel. 

 

Last month, however, China imposed anti-dumping duties of up to 46 per cent on specialist steel products from Japan, South Korea and the European Union.

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