An industry body representing more than 75,000 employees has criticised the government for ignoring the needs of the downstream steel supply chain , a decision that could disrupt critical sectors and risk thousands of jobs.
The Confederation of British Metalforming (CBM) has written to Chris Bryant, Minister of State for Trade Policy, urging Number 10 to reconsider proposed revisions to the UK steel safeguard measures and tariff rate quotas (TRQs) announced last week.
Lobbying on behalf of 200 manufacturers, the organisation has laid out a four-point plan to prevent catastrophic consequences for UK industry, including reassessing the scale of reductions in Category 1A steel, reviewing the methodology used to allocate quotas in Category 4 and ensuring that quotas remain large enough to realistically meet UK production demand.
The CBM is also urgently calling for a ‘backstop’ to be considered, whereby steel can be imported without the 50% tariff if it can’t be produced by a UK mill.
“While we fully support a strong and sustainable UK steel sector, the government’s proposals, in their current form, risk severely disrupting supply chains for downstream manufacturers, particularly those serving the automotive, construction, infrastructure and engineering sectors,” explained Stephen Morley, President of the CBM.
“This whole process has not been inclusive from the outset with no downstream representation on the Steel Council, despite several requests. This has largely contributed to a ‘fait accompli’ and Ministers who have caved to TATA UK’s constant talk of job losses and pulling investment.”
He continued: “As the new quotas were announced, the UK mill immediately increased its prices by over £100 per tonne on some grades of steel. As we stand even before the final quotas are confirmed, we have companies saying their customers will now be importing finished goods directly, rather than buying processed or manufactured material in the UK. This is due to the supply risk and an increase in costs, we fear this is just the start.
“The government needs to urgently review and close the ‘open gate’ they have left for businesses to import finished goods that will bypass quotas and avoid tariffs, tariffs that will start to kill off downstream metal users at an alarming rate. We’re talking ten times the amount of jobs that would be lost if a mill closed.”
In the letter, the Confederation of British Metalforming also calls out the logic behind the formulation of the quotas and this is reinforced by the International Steel Trade Association and Hadley Group, the UK’s largest producer of cold rolled profiles.
They collectively question why the independent capacity review of UK steel production and the ‘wishful’ thinking in what is possible going forward. The organisation argues this should have been carried out by the Trade Remedies Authority, who would have been better placed to provide solutions that suit every part of the supply chain.
“To put this into context, take Category 1A for example. The proposed reduction in TRQs from approximately 988,000 tonnes to just 102,000 tonnes ,represents a reduction of around 90%, and has been described as a ‘nonsense’ within the trade” added Steve, who has worked in the automotive industry for nearly four decades.
“Such a significant contraction risks creating an immediate supply gap, which domestic production is unlikely to fill in the short to medium-term. I’ve had several Tier 1 automotive suppliers already contact me directly on this, who are worried about supplying OEMs.
“Sebden Service Centres alone import 200KT of HRC per annum. 40KT of which is 2000mm wide, not made by Tata. Last year 95KT of 2000mm wide was imported into the UK , which almost covers the new quota alone, on something we can’t even produce!”
“Steel & Alloy in West Bromwich imports 50,000 tonnes for the UK automotive market alone. We understand that TATA UK will remain primarily a re-rolling operation until at least 2029 and is currently facing significant operational constraints, especially with the supply of steel slab due to the sale of HMK.
“Therefore, it is difficult to see how the market could realistically replace current import volumes within the ‘2030’ timeframe proposed.”
The reduction in Category 4 quotas is another major concern for downstream suppliers, with the allocation structure risking excluding traditional suppliers, such as Turkey and Taiwan, while allocating relatively large shares to a limited number of countries.
This could create shortages of specific grades required by downstream manufacturers, particularly within the UK construction and automotive supply chains.
Steve concluded: “The UK consumes approximately 1.3 to 1.4 million tonnes of Category 4 material annually. With Tata supplying around 30% (390,000 tonnes) and EU suppliers typically providing around 40%, we remain structurally dependent on imports from the rest of the world to meet demand.
“If these quotas are reduced by more than approximately 30%, there is a significant risk that supply will fall below market demand. And this could have several unintended consequences, including shortages of critical materials, increased reliance on lower quality supply sources, and much higher costs for UK manufacturers.”
For further information, please visit www.thecbm.co.uk