No deal means no steel

Insight: British Steel sale ‘may take some time’: receiver

A sale of British Steel, which entered compulsory liquidation in late May, is expected to “take some time,” due to “the complicated nature of the business,” and as due diligence takes place by potential investors interested in the entirety of the business, a spokesman for the official receiver said Tuesday.

“There is no specific update available at this time,” the spokesman said in an email to S&P Global Platts. “The official receiver is continuing to assess the most viable offers received for the whole of the business, which are subject to completion of their due diligence. Due to the complicated nature of the business I expect that it will take some time to conclude a transaction. While this process is underway, British Steel is continuing to trade and supply its customers.”

Last week, scrap metal trade association BIR (International Recycling Bureau) reported British Steel’s receiver had indicated it wished to reach a conclusion on the plant’s future by the end of August, following the planned summer shutdown at the company’s integrated plant in Scunthorpe. This followed a July 15 cut-off date for rescue plan bids, according to BIR. However, sources have since indicated that the increasing likelihood that the UK will leave the EU without a deal may now prolong decisions on British Steel’s future.

The receiver’s spokesman Tuesday gave no indication of when a decision may be expected, or whether a sale could occur before a potential Brexit.

British Steel is the UK’s second-largest steelmaker, behind Tata Steel, with around 3 million mt/year of installed capacity. It has sites in the UK, France and the Netherlands and directly employs some 5,000 people. According to UK Steel Association data, British Steel produces 96% of the UK rail network’s steel rail, with customers including the UK’s Network Rail, which takes 100,000 mt/year and is a confirmed bidder for the company. Turkish and Chinese steelmakers recently denied they are interested in bidding for British Steel.

Market indications are that new UK Prime Minister Boris Johnson’s pledge in recent days to boost UK infrastructure, including by building a new rail link between Leeds and Manchester, could help support a sale of the steelmaker, which has recently suffered from squeezed margins due to strong prices for iron ore and coking coal, two of its main raw materials, and carbon emissions prices reaching 11-year highs.

Last week, the French subsidiary of British Steel, British Steel Saint Saulve (known as B3S), was taken out of liquidation by a French court ruling, B3S’s CEO Cedric Orban told Platts.

The Strasbourg High Court approved a Eur94.5 million ($105.3 million) investment and rehabilitation plan backed by private investor Greybull Capital, British Steel’s former owner, the French state and others, which makes B3S (formerly known as Ascoval) completely operational, Orban said in a statement.

‘No deal means no steel’
A no-deal Brexit is considered unfavorable for the UK steel industry as the UK government has already announced plans for zero import tariffs on most steel and steel-containing products in the event of a no-deal exit, in a move to reduce costs for UK manufacturing industry, including the automotive industry.

Despite the tariff news, however, vehicle manufacturers Honda, Ford, Nissan and PSA have all announced plans to either close, move or consider moving production capacity out of the UK as Brexit approaches.

In this scenario, “No deal means no steel” has become a catchphrase used in recent days in parliamentary circles, including by the member of parliament for Scunthorpe, where British Steel’s main plant is located, and by opposition leader Jeremy Corbyn.

— Diana Kinch