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Tata Nears Deal but October Falters

It’s fair to say that the UK steel industry is in something of a crisis at the moment. With allegations that Chinese firms are dumping cheap steal into the European market, those steel institutions based in the UK are either in uproar or suffering huge decline. UK Steel have moved to heap pressure on European lawmakers, saying “The US and other countries have already moved to prevent cheap Chinese imports distorting their markets and now the EU must do the same and, do so quickly. The UK must seize the moment and encourage a rapid response in Brussels if we’re to prevent large scale problems for steel makers spreading in Britain and across the continent.” Alas, it is pressure that appears to have come too late for Tata, who are now approaching a deal which will see them sell their UK operations.

Rumours this week suggest that the steel giant is in talks to offload their business, including the Scunthorpe plant operations. A report by the Sunday Telegraph reveals that Tata has three potential buyers, although none of them are Gary Klesch, the US billionaire and industry legend who was engaged in talks, but has now dropped out. The importance of a deal cannot be overstated, with almost a thousand jobs set to be lost in Scunthorpe because of the troubles with Tata, but it’s far from the only steel company that’s struggling in the UK, with SSI UK also mothballing a plant because of low steel costs in Europe.

The poor form of steel is dragging on overall manufacturing output in the UK, according to the latest figures from the Office for National Statistics (ONS). Manufacturing output for October was 0.1% lower than it was during the same month last year, and was worse than expected, especially compared to the 0.9% increase that was seen in September.

National manufacturers’ organisation EEF found that the steel industry was the main cause of this fall in manufacturing output. In a report published this week, they said announced that there was little reason for ‘festive cheer’ amongst manufacturers as the outlook for 2016 takes on a grimmer and grimmer appearance. The current prediction for the coming year is the first with a negative outlook in six years, the EEF say, as the manufacturing industry’s output balance is set to fall for the fourth consecutive quarter, and perhaps hitting the lowest levels since 2009.

Whilst steel will continue to be hit (unless Europe moves to significantly clamp down), it’s not the case for every industry, with automotive and chemical outputs still looking positive. "The downbeat mood may not be universal across all industry sectors, but it certainly seems to be spreading as the challenges have mounted through this year – from the collapse in the oil price, slower world trade growth and weaker than expected construction activity," EEF chief economist Lee Hopley opined. This is great news for the manufacturing of our hydraulic fittings.

We await further news on a deal to rescue Tata from the brink, but it’s unclear what any potential buyer might have in mind for the business, as steel prices continue to fall.

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