Tata Steel UK raise serious concerns at new steel quota and tariff regime

Its CEO Rajesh Nair says he is very concerned about the implications for the long-term competitiveness, sustainability, growth and future investment outlook for the UK steel sector.

Tata Steel UK is warning that the domestic sector will continues to face major challenges despite a new quota and tariff regime on imported steel.

From July the UK Government will lower the tariff-free quota level for steel importers by 60% compared to current arrangements. This will double import taxes on steel coming into the UK above those levels from 25% to 50%.

It is part of the Westminster administration’ aim to ensure 50% of the steel used in the UK is made in the country, up from 30%.

Tata Steel UK said it has concerns over quota volumes in a number of product categories, including metallic coated steels , packaging steels and hollow sections. It said this will continue to allow significant import penetration and do not sufficiently reflect underlying UK market conditions or the pressures facing domestic steel producers.

Tata, as part of a £1.2bn investment, which includes £500m of backing from the UK Government, is building a new electric arc furnace at Port Talbot following the ending of heavy steel making last year with the closure of the site’s last blast furnace.

The arc furnace will make steel from scrap steel. It was scheduled to become operational last next year, but is now facing a delay of six to 12 months due to connection issues with the National Grid.

On the new tariff and quota regime, which will be reviewed after a year, Rajesh Nair, chief executive of India-owned Tata Steel UK said: ‘A sustainable domestic steel industry depends on a policy framework that supports investment, protects jobs and provides a level playing field for UK steel producers. Steel remains a strategically important foundational industry for the UK economy and wider manufacturing base.

‘We do not believe the final quota levels published reflect UK market conditions or the pressures facing the domestic steel industry. In several categories, the quota volumes continue to allow significant import penetration into strategically important UK steel markets, exposing domestic production and supply chains to continued pressure.

‘If the government’s ambition of building a sustainable steel industry capable of supplying 50% of UK demand is to be realised, quota arrangements will need to provide adequate support for domestic steel producers and support the long-term growth of the UK steel sector.

‘We are disappointed by elements of the final framework announced and we are very concerned about the implications for the long-term competitiveness, sustainability, growth and future investment outlook for the UK steel sector.

‘We expect the Government to reconsider aspects of the framework and continue working with the UK steel sector to ensure a level playing field that supports domestic production, protects employment and strengthens the wider UK manufacturing supply chain.

In a statement to the Commons earlier this week, trade minister and MP for Rhondda and Ogmore, Sir Chris Bryant told MPs: “Canada, the United States, and the European Union have already put in place similar toughened measures to protect their industries. So if we do nothing, or if we delay introducing new measures, we will immediately become the global dumping ground for cheap steel across the world. Again, I say that would mean the end of UK steel production.”

Sir Chris added: “The total quota volume will now be 3.2 million metric tonnes, that is an increase of over 560,000 metric tonnes of steel that can be imported tariff-free compared to the provisional volumes we announced, a significant 21% uplift.

“Having listened to members and to industry, we have increased the quotas in several instances, so as more accurately to protect categories of steel that are manufactured in the UK.

“Some of the changes reflect the fact that the European Union remains our largest export market for steel, and we have highly interconnected supply chains.”

Shadow business secretary Andrew Griffith warned the 50% tariff rate “will do great damage to British manufacturing, to housebuilders and those who construct the nation’s infrastructure”.

He welcomed “concessions” made by the government, but said concern remains over some steel import codes that are used by aerospace and space, arguing defence firms would face higher costs.

William Bain, head of trade policy at the British Chamber of Commerce, said: “These amendments are a welcome tilt towards the needs of the UK’s downstream steel users, employing 300,000 people in the UK.

“They were facing large additional import costs from next Wednesday and the quota changes, for downstream users in category one steel products in particular, will lessen the blow.

“Overall, the changes will reduce the proposed quota cuts from 60% to 51%, which aligns more closely with the EU’s plans. There is a significant increase in the previously proposed tariff free quotas to 3.2m tonnes. This is real move forward from the original proposals, particularly for category one products.

“But the government is walking a precarious tightrope in trying to balance the needs of steel producers and users and its hand has been forced by the actions of other global players.

“There will still be many losers. The government has committed to review these measures in a year’s time but should act more quickly if firms face severe financial distress. We will be speaking to firms in our network to gauge the impact these revised quotas will have on costs and jobs.

“If the pain is still felt to be too severe will be seeking further action on changes to the quotas and an extension to easements.

“Although the government has listened and addressed real business concerns, the dialogue must continue to be responsive to the needs of thousands of downstream steel firms.”