Commentary
British Steel is a strategic company in the United Kingdom, as it has the country’s last two blast furnaces necessary to make new steel. Without the ability to make this virgin steel, the UK would be at a disadvantage in an emergency such as a war. Ships, planes, and tanks need a reliable source of steel, especially when international trade may be blocked.
Yet the British government invited a Chinese company, Jingye, to buy British Steel in 2020. After claiming the company lost money, Jingye reportedly moved to shutter its furnaces. One fewer foreign steel company in the world would help China’s international control over the sector.
The British business secretary, Jonathan Reynolds, said during a debate in the UK parliament on April 12 that Jingye’s “intention was to cancel and refuse to pay for existing orders” of coke coal and iron ore necessary to keep the furnaces operational. Had they gone cool, it would have “irrevocably and unilaterally closed down primary steelmaking at British Steel,” he said. This threatened as many as 3,500 British Steel jobs and the independent ability of the UK to make steel from coke coal and iron ore.
In 1934, the British steel industry was a multitude of private companies. That year, they combined into the British Iron and Steel Federation (BISF) to jointly negotiate with their international suppliers and customers. The industry was nationalized in 1949 and denationalized in 1953. In 1967, the British government nationalized 14 British steel companies into one company: British Steel.
The company’s subsidiaries were not only in the United Kingdom, but also in Africa, Australia, Canada, New Zealand, South America, and South Asia. In 1988, the Thatcher government privatized British Steel, which had become profitable. These profits turned to losses over the years, however. The owner of British Steel prior to Jingye, Greybull Capital, walked away from the investment in 2019.
This is when the UK government approached Jingye to purchase British Steel, which it did in 2020. Jingye promised to invest £1.2 billion. However, British Steel proceeded to lose another £350 million before Jingye said in March it planned to shut the old furnaces. By then, Jingye estimated the plant had lost approximately £700,000 per day. The UK government offered £500 million of the £2 billion necessary to modernize the furnaces with electric arc technology to decrease emissions. But Jingye rejected the plan, wanting £1 billion instead.
On April 12, the British government passed emergency legislation to take over management of British Steel after Jingye apparently threatened to shut down the blast furnaces within days. After the takeover, British police reportedly barred Jingye staff from entering.
Reynolds alleged that by moving to shutter the furnaces, Jingye had not acted in good faith. Reynolds said that the United Kingdom “got it wrong in the past” by selling to a Chinese company, noting the influence that the regime in Beijing has over supposedly private companies in China. He said the British government had been “far too naive” about UK–China trade.
Given that it will be difficult to find a buyer, the company will likely be renationalized. There is support for nationalizing steel on both sides of the British political spectrum. Nigel Farage’s Reform UK party has long called for British Steel to be fully nationalized. Jeremy Corbyn, the former Labour leader, wants to nationalize all steel in the United Kingdom. Resistance to this path comes from concerns about many other privatized British industries that are in distress, including electricity, water, and railway companies. Even the postal service is private in the United Kingdom.
China’s embassy in the United Kingdom is predictably frosty about the government takeover of British Steel. “Any words or deeds that politicise or maliciously hype up business issues will undermine the confidence of Chinese business investors in the UK and damage China-UK economic and trade cooperation,” the embassy wrote.
After nationalization, which could involve a payment of as little as nothing due to the company’s annual losses, those losses will be borne by the British taxpayer. But this will be made up for in taxes on the plant and incomes of the workers, and above all, in national security benefits. The United Kingdom only produces about 0.3 percent of global steel output, but this is enough to give Britain a critical level of independence in terms of this strategic commodity. All G7 nations have that capability. All countries that want industrial independence in case of an emergency should have that capability.
Without it, the United Kingdom would be dependent upon steel manufacturers in other countries, including China. As China is allied with Russia, and Russia is obliquely threatening war against European countries, it is unwise to rely on China for steel imports. Likewise, it was unwise to rely on a Chinese company, controlled as it likely is by the Chinese Communist Party (CCP), to run a steel company in the United Kingdom.The CCP is anti-democracy and anti-Britain. The Opium Wars of the 19th century are regularly trotted out by Beijing to try to make the United Kingdom look bad. It’s time for London to further disengage from Beijing. Fully renationalizing British Steel would be a great first step.
