Nigel's plans scuppered? British Steel

FORMER_FYRDMAN

LE
Book Reviewer
#41
So you're saying that Brexit is a triple whammy on the British steel industry.
1. Excluded from the carbon trading exchange.
2. Exposed to competition from cheep Chinese steel because the British Government is extremely unlikely to maintain EU tariffs on it following Brexit
3. Exposed to competition from cheep European steel because the EU steel makers need new markets as the EU tariffs on Chinese steel are ineffective.
Carbon trading - what a scam that is.
 
#42
Corus were systematically asset stripping the place and moving the best stuff out of the UK, Tata took asset stripping to a new level and the current owners have continued the trend.
Other than the land value and possible patents, what can be asset stripped from a steelworks? Pensions malarky perhaps?

Serious question.
 
#43
So, the bit in the same article that says:
"In the long term, it is thus likely to be the loss of the protection offered by the EU trading bloc that hits the UK industry harder than the present more bureaucratic blip. And while the UK government has promised it will persist with these tariffs unilaterally post-Brexit, whether this resolve to look after an industry with economic output below £2bn survives in the face of efforts to entice tens or even hundred of billions of pounds of investment from Beijing must be open to doubt."

isn't relevant then?
Not really......that's forward looking and entirely hypothetical, while the companys additional cash-flow issues (debt service included) relate to buying emissions permits. Under the EU scheme, the permits were granted free, but the system was scheduled to cease at the point of intended departure. No permits were issued for the "extension", so the company had to find the cash to purchase them, via government debt, to the tune of £120 million.
 
#45
There isn’t.

EU and WTO anti trust laws are quite clear in what can and can’t be subsidised.

Steel is you say is a commodity. It can be readily purchased from multiple sources and HMG can’t even go down the ‘strategic resource’ level as it can be purchased readily from outside the U.K.

The EU won’t allow financial support for it, as British steel going under will benefit EU member states ailing steel industry’s.

There’s been a revival in some sectors of the steel industry with micro steel mills, but that requires long term planning and investment by its owners, however, we appear to be stuck with an asset stripped business that
Is tying to compete with a global glut in steel.

Remember , that the back drop of that nasty man Trumps move against China has been driven in no small measure by China dumping cheap steel onto the market in order to put non Chinese manufacturers who don’t have government subsidies out of business.
The myth of China dumping steel is a myth. Their industry is highly fragmented an diversified. It’s also very modern and efficient and gets significant price advantage by buying ore strategically. The majority of Chinese capacity is privately owned and prices vary massively across the sector. IMHO dumping accusations are a cover for inefficient industries.
 
#48
If HS2 is going ahead, shirley Scunny would be the source of all those lengths of rail thus making a good profit? Seems someone wants a big failure then we can buy the steel from Chermany. :cool:
 
#49
Other than the land value and possible patents, what can be asset stripped from a steelworks? Pensions malarky perhaps?

Serious question.
I seem to remember that the land is owned by Sir Reginald Sheffield's Family and merely leased to the 'Works'. He being the father of our erstwhile Prime Minister's wife - Samantha....
 

FORMER_FYRDMAN

LE
Book Reviewer
#50
A notional value placed on a waste product on the basis of disputed science with the practical effect of displacing high energy using industries to less regulated jurisdictions with no detectable global emissions benefit.
 
#51
Other than the land value and possible patents, what can be asset stripped from a steelworks? Pensions malarky perhaps?

Serious question.
There is a lot of value in the order book which can be also sold on as "goodwill" in accountancy parlance.

Various tax credits can be obtained to write off tax. E.g. Corporation Tax.

There are also tax credits for "innovation and investment".

And let's say that Scunny is the centre for widget manufacture in the UK, but there is an EU competitor who also makes a similar type of widget which isn't as good because they don't have the specialist metallurgical or production knowledge. They will pay for the intellectual property, or sometimes even to buy the opposition out of the business altogether.
 
#52
The myth of China dumping steel is a myth. Their industry is highly fragmented an diversified. It’s also very modern and efficient and gets significant price advantage by buying ore strategically. The majority of Chinese capacity is privately owned and prices vary massively across the sector. IMHO dumping accusations are a cover for inefficient industries.
State owned I’m afraid.

Steel industry in China - Wikipedia
 
#53
If HS2 is going ahead, shirley Scunny would be the source of all those lengths of rail thus making a good profit? Seems someone wants a big failure then we can buy the steel from Chermany. :cool:

Isn't it under EU law that all member states are entitled to bid in national contracts
Isn't that the reason we built one aircraft carrier and are building a second using French Steel
 
#54
You need to dig beneath the surface.

China’s top ten steel producers account for about 40% of their capacity, most of which is consumed domestically on government projects. The next 75 companies account for about 50% of capacity and are privately owned. The internal market for steel in China is cut throat because there is over capacity of quality production. Chinese steel is cheaper because the industry is modern and efficient.

The Chinese steel industry was the subject of my MBA dissertation. No one has proven Chinese government intervention to subsidise their steel industry.

As an engineer and program director I want the cheapest steel that meets my specification. I don’t want increased input costs to protect inefficient industry. My biggest concern with Chinese steel is specification but that is driven by different standards not quality.
 
#55
You need to dig beneath the surface.

China’s top ten steel producers account for about 40% of their capacity, most of which is consumed domestically on government projects. The next 75 companies account for about 50% of capacity and are privately owned. The internal market for steel in China is cut throat because there is over capacity of quality production. Chinese steel is cheaper because the industry is modern and efficient.

The Chinese steel industry was the subject of my MBA dissertation. No one has proven Chinese government intervention to subsidise their steel industry.

As an engineer and program director I want the cheapest steel that meets my specification. I don’t want increased input costs to protect inefficient industry. My biggest concern with Chinese steel is specification but that is driven by different standards not quality.
The 75 sounds a little like the Railway boom here. Are many failing?
 
#56
There is a lot of value in the order book which can be also sold on as "goodwill" in accountancy parlance.

Various tax credits can be obtained to write off tax. E.g. Corporation Tax.

There are also tax credits for "innovation and investment".

And let's say that Scunny is the centre for widget manufacture in the UK, but there is an EU competitor who also makes a similar type of widget which isn't as good because they don't have the specialist metallurgical or production knowledge. They will pay for the intellectual property, or sometimes even to buy the opposition out of the business altogether.
None of which is asset stripping.

There will be zero goodwill, it will have been written down at the point where the company was sold for £1.

The "tax credits" part requires a profit against which deductions can be made. They can be carried over (not in perpetuity), but that's tax equity, not asset stripping.
 
#57
A notional value placed on a waste product on the basis of disputed science with the practical effect of displacing high energy using industries to less regulated jurisdictions with no detectable global emissions benefit.
The value ascribed isn't "notional", it's "nominal" in the parlance. The science is disupted in as much a manner as those who suggest smoking doesn't cause lung cancer.

I agree that for many industries, the effect is to drive industry offshore to lower cost jurisdictions. However, a good many of the energy intense industries also enjoy significant tariff protection.
 
#58
The 75 sounds a little like the Railway boom here. Are many failing?
There’s been a lot of consolidation over the last decade with older plants closing or merging. My source was a World Steel report from IIRC 2016.

I think China’s a large part of their price advantage comes from their buying power. They have massive advantage of scale when purchasing raw materials compared with little old British steel.

India is interesting; it has huge reserves of iron ore which China cannot match, but it can’t get price advantage over China because everything is so sclerotic.
 
#60
There is a lot of value in the order book which can be also sold on as "goodwill" in accountancy parlance.

Various tax credits can be obtained to write off tax. E.g. Corporation Tax.

There are also tax credits for "innovation and investment".

And let's say that Scunny is the centre for widget manufacture in the UK, but there is an EU competitor who also makes a similar type of widget which isn't as good because they don't have the specialist metallurgical or production knowledge. They will pay for the intellectual property, or sometimes even to buy the opposition out of the business altogether.
Notwithstanding @Banker’s observation about the write down of British Steel’s goodwill when it was sold, I’m not sure there is ever much goodwill in a business that manufactures commoditised products. For most steel consumers, the cost of switching supplier is low. Indeed many don’t have a direct relationship with the mill because there are wholesalers and fabricators between the two.

The goodwill of the order book is near valueless if a customer can buy an equivalent product for less.
 

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