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There is unlikely to be a private investor willing to take the plant on.
When Redcar, and other plants were producing at capacity, China was the biggest customer for steel from anywhere in the world.
Now, China's domestic production of steel accounts for more than half the steel produced in the world.
The obvious contraction of China's need for steel from outside manufacturers means that the market, and the price have both dive bombed, which has led to this mothballing - in the hope that the market may pick up again.
Simple economics means that no private investor will put money into a company making a product it cannot sell at a profit, so that is the situation we are in.
European legislation to which the UK is bound means that the government cannot invest in a loss-making company, so the mothballing is the only solution in sight.
When Redcar, and other plants were producing at capacity, China was the biggest customer for steel from anywhere in the world.
Now, China's domestic production of steel accounts for more than half the steel produced in the world.
The obvious contraction of China's need for steel from outside manufacturers means that the market, and the price have both dive bombed, which has led to this mothballing - in the hope that the market may pick up again.
Simple economics means that no private investor will put money into a company making a product it cannot sell at a profit, so that is the situation we are in.
European legislation to which the UK is bound means that the government cannot invest in a loss-making company, so the mothballing is the only solution in sight.
Mikey - //Andy...the Government could help in all sorts of ways. For instance they could reduce the companies business rates, which would go a long way to assist the Company in being solvent.
But its true that China is the cause of this problem. //
Reducing business rates would be in contravention of European law to which the UK is bound, which prevents any government financial intervention to aid a failing company. So even if the measure were successful - which personally I feel would only be prolonging the inevitable - it is not legally possible.
But its true that China is the cause of this problem. //
Reducing business rates would be in contravention of European law to which the UK is bound, which prevents any government financial intervention to aid a failing company. So even if the measure were successful - which personally I feel would only be prolonging the inevitable - it is not legally possible.
jourdain2 - //If they let the furnaces out then it will cost another fortune to get the plant re-started. //
The local MP has already voiced concerns that 'mothballing' and securing the plant to an acceptable health and safety regulated standard, as well as ensuring that it can be resurrected in the future, is going to cost serious money for the tax payer.
I'm glad I don't have to figure out the solution to this!
The local MP has already voiced concerns that 'mothballing' and securing the plant to an acceptable health and safety regulated standard, as well as ensuring that it can be resurrected in the future, is going to cost serious money for the tax payer.
I'm glad I don't have to figure out the solution to this!
It has ****er all to do with energy prices. We have 1700 staff at what wage?
What wage levels do you imagine pseudo-communist China pays, by comparison?
We are uncompetitive in this specific product because we all play keeping up with the Joneses, expect certain salary levels or else we strike and insist on chasing each others salary levels when some other union leverages a good raise.
All the 1970s obsession with getting the same percentage rise. One type of work's 3% is bigger than another's when it was bigger to start with. No pay deal was ever struck in absolute terms, pounds per year because that would allow annual pay rates to be back-calculated and the pay packet's contents were sacrosanct.
We are our own worst enemy, sometimes.
What wage levels do you imagine pseudo-communist China pays, by comparison?
We are uncompetitive in this specific product because we all play keeping up with the Joneses, expect certain salary levels or else we strike and insist on chasing each others salary levels when some other union leverages a good raise.
All the 1970s obsession with getting the same percentage rise. One type of work's 3% is bigger than another's when it was bigger to start with. No pay deal was ever struck in absolute terms, pounds per year because that would allow annual pay rates to be back-calculated and the pay packet's contents were sacrosanct.
We are our own worst enemy, sometimes.
Might I add that, in the past, strangulating another country's ability to trade and thus hurt its ability to feed (some of) its own people (long before welfare state) was considered an act of war.
They haven't exactly bombed the factory but they have, nevertheless partially destroyed it and it will even cost us a packet to shut it down in a reversible way.
If diplomatic relations with China ever take a turn for the worse, or we need thousands of tanks in a hurry, we are up that creek without a steel plant and 1700 people with the kind of skills which will now fade away, as they retrain to work... in whatever.
They haven't exactly bombed the factory but they have, nevertheless partially destroyed it and it will even cost us a packet to shut it down in a reversible way.
If diplomatic relations with China ever take a turn for the worse, or we need thousands of tanks in a hurry, we are up that creek without a steel plant and 1700 people with the kind of skills which will now fade away, as they retrain to work... in whatever.
Hypognosis - //It has ****er all to do with energy prices. We have 1700 staff at what wage?
What wage levels do you imagine pseudo-communist China pays, by comparison?//
I have to disagree.
When China imported its steel, the UK offered steel at a competitive price, and that included the wages of the staff who produced it, and the costs of transporting it.
As soon as China began bulk producing steel domestically, it matter not what price any foreign producer could offer, it was never going to be cheaper than China could make it for without import costs.
That is the issue - it has nothing to do with UK wages, or anyone else wages.
If you can produce anything at home, it will be cheaper than importing it - that is a basic fact of economics.
And in this scenario - Redcar are the losers, sadly.
What wage levels do you imagine pseudo-communist China pays, by comparison?//
I have to disagree.
When China imported its steel, the UK offered steel at a competitive price, and that included the wages of the staff who produced it, and the costs of transporting it.
As soon as China began bulk producing steel domestically, it matter not what price any foreign producer could offer, it was never going to be cheaper than China could make it for without import costs.
That is the issue - it has nothing to do with UK wages, or anyone else wages.
If you can produce anything at home, it will be cheaper than importing it - that is a basic fact of economics.
And in this scenario - Redcar are the losers, sadly.
andy_hughes
I will accept your point about shipping/import prices when you make an educated guess (or unearth actual facts) about the equivalent wages of Chinese steel workers.
Redcar doesn't have to sell steel *to* China; it can sell to German ship manufacturers a short hop away.
If Germany can import steel which is cheaper even *after* coming all the way from China by ship, what would that tell you about the cheapness of Chinese steel manufacture? Extrapolate the wage levels from that.
In accordance with my username, "I don't know enough" and need more information about this. Whadda ya got?
I will accept your point about shipping/import prices when you make an educated guess (or unearth actual facts) about the equivalent wages of Chinese steel workers.
Redcar doesn't have to sell steel *to* China; it can sell to German ship manufacturers a short hop away.
If Germany can import steel which is cheaper even *after* coming all the way from China by ship, what would that tell you about the cheapness of Chinese steel manufacture? Extrapolate the wage levels from that.
In accordance with my username, "I don't know enough" and need more information about this. Whadda ya got?
This is a very sad day for Teeside, the area is already deprived of opportunity for work and my thoughts are with those who now have no jobs.To blame market forces for the problem is insulting , to the workforce. In my view problems such as this are caused by the inherent greed of multi - national companies seeking the big dollar. Shame on them.Brenda.
Having heard the reasons why our government cannot buy into and help out the steelworks - it is yet another good reason for leaving the E.U. A.S.A.P. as far as I am concerned.
I would rather commission another 'Ark Royal' to add to our defence force and buy the steel from Redcar. At least we would not be paying benefits to ex-workers (and losing the tax they pay) and raising yet another generation of children with parents on the dole in a crumbling, derelict area with no hope. I'm quite cross actually. :( (Don't often get quite as annoyed as this.)
I would rather commission another 'Ark Royal' to add to our defence force and buy the steel from Redcar. At least we would not be paying benefits to ex-workers (and losing the tax they pay) and raising yet another generation of children with parents on the dole in a crumbling, derelict area with no hope. I'm quite cross actually. :( (Don't often get quite as annoyed as this.)
jourdain2
How would leaving the EU raise the price of steel to a point where it became profitable to produce it in the UK?
The Chinese plants produce steel at around 35% of what it costs to produce it in the UK and the price is dropping further with the Chinese devaluations.
No government can afford to throw money away at the rate that would be needed to subsidise UK steel production.
How would leaving the EU raise the price of steel to a point where it became profitable to produce it in the UK?
The Chinese plants produce steel at around 35% of what it costs to produce it in the UK and the price is dropping further with the Chinese devaluations.
No government can afford to throw money away at the rate that would be needed to subsidise UK steel production.
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