Paul Vallely: Why is China interested in our steel?

by
15 November 2019

Paul Vallely is sceptical about a deal struck with the UK

PA

Workers leave a steel plant in Scunthorpe earlier this year

Workers leave a steel plant in Scunthorpe earlier this year

PHEW! That’s a relief! Four thousand jobs saved at British Steel, and 20,000 more secured in the company’s supply chain. The Chinese have ridden to the rescue with the spectacular good timing once associated only with the United States cavalry. The British taxpayer will be saved the £1 million a day it was costing to prop up the failing company. And it has all happened just as the Conservative Party’s election campaign gets off the ground.

Forgive me if I am a little sceptical. Let’s set aside the irony of the Chinese — who drove our steel industry to the edge of extinction by unscrupulously dumping cheap steel on world markets — now turning up to buy what’s left of the industry at a knockdown price. But what is worth noting is that the UK, under the government of David Cameron and George Osborne, resisted European Union anti-dumping measures because they were so anxious to ingratiate themselves with President Xi.

That is not all. The looming prospect of Brexit — brought to you thanks to Mr Cameron’s pusillanimity in the face of Eurosceptic calls for an In/Out referendum — has so weakened the pound that the Chinese and other foreigners can buy up British companies at bargain-basement prices.

It is hard to see how the Chinese can make a profit from running British Steel. The previous owners — the private equity barons of Greybull Capital — promised high investment, but allowed the company to go bust six months ago, blaming weak demand, high raw-material prices, and the weak Brexit pound. The Turkish company Ataer, which was given three months’ exclusive access to British Steel’s accounts, walked away, convinced that it could not make a profit. The unpalatable fact is that making steel in the UK no longer makes economic sense, now that we have no iron ore, no coal, and very high energy costs.

So, why do the Chinese think differently? Some, like Julian Lewis, the Tory chairman of the last Parliament’s defence committee, has suggested that it is because China has a geopolitical interest in controlling our strategic supply of steel. The same concerns have been raised about the idea of allowing another Chinese company, Huawei, to control Britain’s 5G telecommunications network.

These are not unreasonable apprehensions. For all China’s change in economic matters, it remains a repressive regime, as the scenes this week on the streets of Hong Kong testify.

The answer to the puzzle may, however, be more venal. Chinese steel-producers have a history of being highly predatory. It may be that they want to bring cheap Chinese steel into Britain, roll it in Scunthorpe, and then export it as “Made in Britain”. It may be that Jingye, a supplier to China Railway Group, wants only to pirate the expertise of British Steel specialists, who produce some of the world’s best railway tracks, then close the company and take their newly acquired skills back to China.

Or it may be, as Sky News has suggested, that the Chinese have, behind the scenes, been promised loan guarantees worth £300 million by Tory politicians. If our politicians really cared about the industry, the Government would retain a golden share in British Steel and a seat on the board. I wonder whether that will happen.

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