The owner of Britain’s biggest steelworks has reported losses more than doubling as it buckles in the face of high taxes and energy costs, the strong pound and cheap Chinese imports.
Tata Steel UK, which owns the giant Port Talbot and Scunthorpe plants, posted a pre-tax loss of £768m in the year to the end of March, up from a £354m loss last year.
The move deeper into the red was partly driven by the company – an offshoot of Indian conglomerate Tata – taking a £314m hit from restructuring and impairments. The company could face more charges this year, having cut 1,000 staff and agency jobs since July.
Revenues also fell, down 7.3pc to £4.2bn and production was down 300m tonnes to 8.2m tonnes, due to “operational issues” at plants.
The poor performance is partly down to imports of cheap Chinese steel, according to a source close to the business. About half of the 1.6bn tonnes of steel made worldwide each year comes from China, which is now exporting about 100m tons a year as its economy slows.
In its annual accounts Tata Steel UK said that average revenue per tonne of steel it produced had fallen 6pc, because of “downward pressure on steel selling prices, caused primarily by lower raw material prices”.
Britain’s steel industry faces a unique set of pressures, according Gareth Stace, director of trade association UK Steel. “It’s an unsustainable situation for the industry,” said Mr Stace.
“Chinese imports were 2pc of UK steel demand in the first half of 2011, that’s expected to be 8pc this year. Britain’s steel makers also face a strong pound, high energy costs, environmental levies and high business rates that foreign competitors don’t.
“The industry is not asking for a handout, just a level playing so it can compete,” he added.
A spokesman for Tata Steel UK said: “We continued to make good progress in areas under our control… but external factors are having an increasingly damaging effect on the European steel industry, including the UK’s. International steel prices are still well below the pre-crisis peak and EU demand growing at best modestly, the rise in steel imports into Europe is cause for great concern.”
He added that some countries are beginning to adopt a protectionist policies against imports, meaning even more steel could be pushed towards the “relatively unprotected” EU market.
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