Tuesday 6 December 2016

Steel loss threatens British supply chains

Andy Bruce

Published 04/04/2016 | 02:30

The sun sets behind the Tata Steel plant at Port Talbot. Photo: Getty Images
The sun sets behind the Tata Steel plant at Port Talbot. Photo: Getty Images

The closure of Tata Steel's operations in Britain would leave a hole in manufacturers' supply chains, dealing a blow to thousands of smaller firms across the country and creating a logistical headache for the car industry.

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India's Tata Steel, which is Britain's biggest producer, put all of its operations up for sale including Britain's biggest steelworks at Port Talbot, which is losing $1.4m (€1.2m) a day due to depressed steel prices and high costs.

As the government searches for a buyer, some of Tata's customers are already looking for new sources of steel, which is used in everything from car roofs to baked bean cans, cladding on Ikea buildings and some coins.

While bigger names have the luxury of a global supply chain to fall back on, smaller companies, which account for around 95pc of British manufacturing firms, face a tougher task if the Port Talbot plant in south Wales closes.

"It would be entirely undesirable from my point of view," said Tony Mullins, executive chairman of QRL Radiators Group, a Tata Steel customer that makes heating radiators near the Welsh town of Newport and employs 150 people.

Looking abroad for steel would leave firms such as QRL exposed to swings in the currency exchange rate and higher transportation costs. It might also need to hold more stock if it is buying from the other side of the world, having an impact on working capital.

Britain is the birthplace of the modern steel industry but since 2001 imported supply, much of it from Germany, accounts for half the market as local producers struggle with high energy costs, green taxes and competition.

Reuters

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