Judging from the collapse of the steel industry, has the UK's deindustrialization gone astray?

Recently, British Steel, a UK-based steel company, plans to close two blast furnaces as early as June this year. Coincidentally, these two blast furnaces are the last ones in the UK.

This news means that the UK is about to become the first major country to cease steel production since it embarked on the path of industrialization.

Steel is everywhere in our daily lives, from large structures such as bridges and buildings to small daily necessities like pots and pans. Its importance is self-evident.

British Steel is the "big brother" of the UK steel industry and has played a pivotal role in the development of the UK steel sector.

Its predecessor can be traced back to the British Iron and Steel Company, which was nationalized through the Iron and Steel Act in 1949. In 1967, the Labour government nationalized the industry again, and British Steel Company (BSC) was officially established.

At that time, it accounted for about 90% of the UK's steel production capacity, with approximately 268,500 employees. It had wholly-owned or partial subsidiaries in many locations around the world, making it a significant player in the global steel industry at that time.

Later, after a series of changes, in 2016, the UK investment company Greybull Capital acquired Corus, which had been loss-making for some time, from Tata Steel for a symbolic £1 and restored its original name, British Steel.

Subsequently, on March 9, 2020, a group from Hebei, China, completed the asset transfer of British Steel's operations in the UK and the Netherlands, marking a new chapter in the history of British Steel.

However, now it is about to close its last two blast furnaces, and there are several reasons behind this.

From an economic perspective, British Steel has been operating at a loss in recent years.

Take the Port Talbot steelworks, formerly owned by Tata Steel, as an example. This steelworks, with a history of over a hundred years, has been losing $1.3 million per day in recent years. Under such prolonged and substantial losses, it is very difficult for the company to maintain operations.

British Steel is also facing tremendous financial pressure. Persistent losses are like an inescapable "heavy burden" that is suffocating the company. Closing down blast furnaces seems to be an inevitable yet reluctant choice.

Cost issues are also a key factor contributing to this situation.

Although British Steel is a "major player" in the UK, when placed on the global market stage, it becomes evident that its cost competitiveness is severely lacking.

With the development of the global steel industry, many emerging steel-producing countries have been rising. Relying on lower labor costs, more abundant raw material resources, and more efficient production technologies, they have occupied a place in the global steel market.

When competing with these emerging steel enterprises, British Steel has no price advantage due to its persistently high costs. As a result, its products cannot be sold, and profits naturally become unattainable.

Let's talk about industrial supporting facilities. The deindustrialization in the UK is not an empty statement.

Once, the UK became the "workshop of the world" thanks to the Industrial Revolution, and its steel industry was booming. There was a complete upstream and downstream industrial supporting system around the steel industry.

However, with the advancement of deindustrialization, a large number of related enterprises have closed down or relocated, and many industrial supporting links are missing.

Take decarbonization and green transformation as an example. This is a major trend in the future development of the steel industry, and the UK government also intends to subsidize 500 million pounds for this transformation.

The problem is that, domestically, due to deindustrialization, the UK cannot carry out the supporting work on its own. If it invites Chinese engineering companies to do it, it needs to go through complex procedures, and the costs cannot be controlled.

Such a transformation would cost only 100 - 150 million pounds, but in the UK, due to industrial supporting issues, this transformation plan ultimately fell through. This also reflects, from the side, the difficulties faced by the UK steel industry due to the lack of industrial supporting facilities.

The international environment has also dealt a heavy blow to the UK steel industry. The US steel and aluminum tariffs are like a "big knife" that has heavily hit the UK steel industry.

The UK's domestic market is relatively limited, and a large proportion of its steel products rely on exports. The United States is one of the important markets for UK steel exports.

After the US imposed steel and aluminum tariffs, the cost of UK steel exports to the US increased significantly, and its price competitiveness was greatly reduced. A large number of orders were lost, which is undoubtedly adding insult to injury to the already troubled UK steel industry.

In addition, the UK steel industry has gradually fallen behind other countries in terms of technological innovation.

Steel production technology is constantly evolving, and new production processes and technologies are emerging one after another, such as more efficient smelting technologies and more environmentally friendly production methods.

Some major steel-producing countries have continuously increased their investment in technological research and development, updated equipment, and improved production processes, thereby improving production efficiency, reducing costs, and enhancing product quality.

In contrast, due to the long-term lack of funds for technological research and development and equipment updates, the UK's steel production technology has gradually fallen behind the times, and its products' competitiveness in the international market is getting weaker.

From the perspective of historical development, the UK's deindustrialization process started earlier and was more "thorough" than that of the United States.

Once, the UK was the "leader" of the world's industry, the birthplace of the Industrial Revolution, and its industries such as steel, automotive, and machinery manufacturing were highly developed.

However, later on, the UK gradually transferred some traditional manufacturing industries overseas and vigorously developed service industries such as finance. During this process, many industrial sectors gradually shrank, and the steel industry is a typical example.

The UK no longer has a decent large-scale automotive industry. Its once well-known automotive brands have basically been sold, leaving only a few handcrafted luxury car brands built with craftsmanship. Their prospects are also not optimistic.

More surprisingly, as one of the five permanent members of the United Nations Security Council, the UK is the only country that cannot build nuclear power plants on its own.

All these phenomena indicate that due to deindustrialization, the domestic demand for steel in the UK is gradually drying up. Without the support of market demand, it is even more difficult for the steel industry to develop.

The decline of the UK steel industry brings us many thought-provoking questions.

For the UK, the decline of its once-proud steel industry will have a profound impact on its national economy, industrial structure, employment, and other aspects.

Losing the steel industry means that the UK may face the risks of technological discontinuity and industrial hollowing out in some related high-end manufacturing fields.

For other countries, this is also a warning. In the process of industrial development, one should not blindly transfer industries but pay attention to the rationality of the industrial structure and maintain the competitiveness of key industries.

At the same time, governments should fully consider the long-term development of industries when formulating industrial policies and not just focus on short-term interests.

In today's global economic integration, the industries of various countries are closely linked. The rise and fall of any industry may have a far-reaching impact. We must examine and address the problems that arise during the process of industrial development from multiple perspectives.

All in all, the situation of the UK steel industry may seem like a simple event of a company closing down its blast furnaces on the surface, but behind it lies a complex set of factors involving the economy, industry, international environment, and more.
Sinosteel Stainless Steel Pipe is the Manufacturer and Supplier of Stainless Steel Pipe and Special Alloy Pipe, Steel pipes with an outer diameter from 8mm to 3600mm, with wall thicknesses from 0.2mm to 120mm. Factory covering an area of 333,000 square meters. Production capacity reaches 200,000 tons.

From : https://www.sinosteel-pipe.com/en/blog-5585416344651185.html