[Source/Observer Network, Winter晓]
According to British media reports, the UK Parliament recently passed an emergency bill allowing the UK government to take over British Steel to maintain the daily operation of steelmaking blast furnaces. Business Secretary Jonathan Reynolds was granted emergency powers to purchase raw materials needed for steelmaking by the company. In short, the UK government will cover the operating costs of British Steel.
This has raised concerns about the bleak future of Scunthorpe Steelworks, and discussions about whether the UK government should nationalize British Steel have been rampant. If the factory is to continue operating and transition to low-carbon steel production, nationalization is the only option. Currently, this steel mill is the only large-scale manufacturer of primary steel in the UK. Once the blast furnaces are shut down, the UK will become the only G7 country unable to produce primary steel using iron ore, coking coal, and other raw materials.
Scunthorpe Steelworkers and union members holding up "Save the Steelworks" signs during a march - The Guardian
This is not a new operation. As early as 2021, the UK government nationalized Sheffield Forgemasters, a supplier to the defense industry, promising a £400 million investment over the next decade. The current困境 faced by British Steel is just a microcosm of the overall decline of the entire UK steel industry over the past few decades. No matter how optimistic Prime Minister Starmer may be, believing that the public investment agenda set by Labour will bring enough housing and commercial office construction, or through railway construction to boost demand for steel to save the precarious UK steel industry, the cruel reality is that the UK government does not have the ability to reverse the decline of the UK steel industry. Whether it's nationalization or privatization, it is merely a political need for the two parties in the UK.
In 1945, Labour won the general election and promised to include several key industries in state ownership. A year later, the UK government implemented the first steel development plan and passed the Iron and Steel Act in 1949, thereby purchasing shareholders' shares and establishing Great Britain Steel Corporation. However, with the rise of the Conservative Party in 1952, the nationalization of the steel industry was overturned. It wasn't until 1967 when another Labour government returned and once again proposed nationalization that British Steel Corporation was officially established.
After more than 20 years of political struggle, British Steel Corporation was left in tatters, with problems such as low production efficiency, poor product quality, and outdated smelting technology remaining unresolved. It then collided head-on with rising fossil fuel prices and increased international market competition. The decline of the industry was inevitable, but the Labour government had to keep many factories running at a loss to maintain employment, which gave Margaret Thatcher, who came to power in the 1980s, the reason to privatize the UK steel industry again. Subsequently, British Steel underwent massive layoffs and comprehensive restructuring and made substantial capital investments.
As a result, the Conservatives gained political capital. They claimed in the 1987 general election that since privatization, productivity at British Steel had doubled compared to 1979, achieving profitability for the first time in ten years, which also gave them the reason to continue pushing for privatization plans. By 1988, the assets, rights, and debts of British Steel Corporation were transferred to British Steel plc, which was listed on the London Stock Exchange that same year.
Scunthorpe Steelworks - BBC
Afterwards, British Steel entered a period where it was bought and sold by international companies. First, it merged with a Dutch steel producer, forming Corus Group in 1999. According to market share at the time, this newly merged company was the third largest steel producer globally, with total revenue exceeding 15 billion euros.
However, their cooperation was always accompanied by friction. In 2002, Corus attempted to sell its profitable aluminum business for $500 million but encountered opposition from the company's internal Dutch directors, as they believed the deal was merely intended to cover losses in the UK steel sector rather than make better investments. Thus, the steel industry, once a pillar of the nation, became a pawn in financial capital games, with no one caring about technological innovation and industrial upgrading, only rising stock prices could stir emotions.
In 2007, India's Tata Steel joined the acquisition of Corus and defeated its competitor from Brazil in the bidding process. At that time, Corus's market value had reached 5.75 billion euros, and after the news broke, the stock price surged instantly, closing up nearly 7%. Investors welcomed the outcome very much. Ratan Tata, owner of Tata Steel, praised the acquisition as a "moment of great achievement for all Indians."
Yes, you heard correctly. Within eight years after the largest UK steel company merged with a Dutch enterprise, it sold itself to another Indian steel giant. At that time, Corus was the world's ninth-largest steel producer with revenue of 10.14 billion euros. When it first merged eight years prior, Corus was the world's third-largest steel producer with revenue exceeding 15 billion euros.
In terms of corporate competitiveness, the merger never made Corus better, nor did it improve UK steel. Although it did achieve certain progress in stock quotes, the negative consequences began to manifest in the following decade.
In 2008, the financial crisis erupted, and European steel demand declined. Affected by the recession and high debt levels, Tata Group began selling some of its long-term businesses and products in Europe. Scunthorpe Steelworks was included in this list. Ultimately, Tata Group reached an initial agreement with Greybull Capital, and in 2016, both parties agreed to symbolically sell the department for €1, which meant British Steel. After briefly achieving profitability for a year, the situation took a sharp downturn, and in 2019, British Steel entered bankruptcy proceedings.
The UK government urgently stepped in to find a buyer because if British Steel collapsed, over 5,000 jobs, along with 20,000 jobs in upstream and downstream supply chains, would be at risk. Suddenly having tens of thousands of unemployed people on the streets would not only shake social stability but also destabilize voter preferences in remote areas where employees come from nearby towns. Any slight change could cause voters in the constituency to flip their preferences.
Location of Scunthorpe Steelworks - BBC
Amidst the UK government's desperation, Turkey's Altai Holding was the first to give an initial offer. This company, backed by the Turkish military, is a subsidiary of Oyak Pension Fund and owns 50% of the largest steelmaker in Turkey. After signing the preliminary agreement in August, both sides failed to reach consensus on specific terms. At the moment of despair, a Chinese company named Jingye Group appeared, expressing its intention to acquire British Steel and even offering quite generous conditions: purchasing British Steel for €50 million and promising to invest an additional €1.2 billion to expand production and serve the UK and European markets.
Looking back at Jingye Group's deal now, it inevitably raises criticism and skepticism, especially considering the frequent news of Chinese enterprises being manipulated by enterprises and governments alike in overseas investments. But since 2016, Europe has taken a tough stance against Chinese steel, implementing a series of anti-dumping measures that impose high tariffs. To protect themselves, it is very normal for Chinese enterprises to consider acquiring UK companies as a stepping stone into Europe. From subsequent developments, Jingye Group's original intent was not to integrate and support UK steel resources but to target the factory in Ayans, France, owned by British Steel. This factory annually produces around 300,000 tons of railway tracks, serving the French rail network, including SNCF, the French state-owned railway company.
Acquiring this factory means Jingye can secure stable orders from the French government. Then, through operations such as importing primary steel from China to the Scunthorpe factory in the UK and the Ayans factory in France, processing it into higher-value products, and labeling them as "Made in the UK" and "Made in France," which are easier for major clients like the UK Railways and state-owned companies like SNCF to accept.
In simple terms, the Ayans factory is the most valuable asset among all assets of British Steel. Not only is it the only profitable company within the group, but it is also a gateway to the European market. However, as you might expect with any story involving the UK and France, when one side tries to push things forward positively, the other side will awaken some kind of instinctive talent to act as a saboteur.
At the critical moment when Jingye Group was acquiring British Steel, the French government predictably jumped in, claiming that the Ayans factory was a strategic national asset for France and could not fall into Chinese hands for national security reasons. Of course, the old Europeans didn't stay idle either; the European steel lobbying group, Eurofer, demanded an EU investigation into the transaction, fearing it might violate state aid rules.
Former French Finance Minister Bruno Le Maire directly threatened to veto the acquisition agreement. Following this, with the support of the French government, the factory placed an advertisement in the French newspaper Les Echos calling for separate sales of the UK and French plants. Although these advertisements did not mention the factory's name, they stated that it produced "steel products used in railways, subways, and trams" and employed approximately 450 workers, all of which matched the Ayans factory,也算是一种掩耳盗铃.
Upon receiving the message, Jingye immediately submitted an application to the French authorities for approval of the investment and maintained constructive discussions with the French government, fearing the deal might fall through. The UK government, eager to avoid failure, quickly helped urge France to show leniency, but the French side remained unmoved. In the end, although Jingye completed the acquisition of British Steel, it failed to obtain the most coveted Ayans factory.
Subsequently, Jingye participated in the separate bid for the Ayans factory but still failed to succeed. In 2020, the factory was acquired by Liberty Steel, a privately held steel company based in London. An interesting fact is that Liberty Steel, at the same time, also acquired a steel plant named Escovar in northern France, aiming to supply raw materials to the Ayans factory. The previous owner of Escovar Steel was none other than Greybull Capital – remember, it was this institution that, in 2016, took over British Steel for the symbolic price of €1 from Tata Steel and then handed over a mess to the UK government and Jingye Group.
The story doesn't end here. A year later, the Ayans factory was sold to Germany's SHS Group – from my personal perspective, I don't understand how the French could accept selling a strategic national asset to a German company, given that Germany really did reach Paris, whereas China's "offensive" in Europe exists only in certain comedy films.
We don't know what considerations led Jingye Group to complete this acquisition, but the fact is that despite numerous arguments proving British Steel beyond salvation, Jingye Group still managed to extend its life for five more years. Unfortunately, no one expressed gratitude. Western media continued to blame the decline of British Steel on their fabricated "Chinese steel dumping" narrative, completely disregarding the factory's long-standing self-imposed isolation and lack of progress.
Even today, the Western media's reporting line remains "we were too naive and trusting of Chinese enterprises, leading to the current downfall of British Steel" and "Chinese enterprises refusing to provide raw materials to British Steel, intending to force the factory to shut down." The cycle of UK's repeated experiments with state-owned, privatized, and re-nationalized industries is about to play out again. As for what results this round will bring, I can only say that a person's cognition matches the suffering they endure, and nations are no exception.
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