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Durudarshan - Investment Analysis

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With such high energy costs, how can British steel industry survive? Yet survive it must.

Posted on November 10, 2015 at 2:58 PM Comments comments ()
It seems a topic for consideration.  Electricity in Britain is said to cost 80 percent more than on Continental Europe.  Even there, in Continental Europe, it is said to be 200 percent more than the cost in the United States.  In short, in Britain, electricity cost is 280 percent higher than the U.S.
In that context, how can the British steel industry survive?

The recent closures by SSI, Tata Steel, and Caparo, and fall in revenue seen by others in this sector, just shows what hard times the global overcapacity of production, the slowdown in current use of steel, the government subsidies offered in China to steel exporters, the European Union rules that don't seem to allow for such subsidies, have affected this sector, but, most importantly, are probably affecting other manufacturing sectors as well in Britain. England cannot just blame unfair competition, but must ensure corrective measures are considered and legislation implemented, to ensure survival of the British steel industry but also the rest of the manufacturing industries.  That is the challenge the Secretary for Trade and Industry, Sajid Javid, has to find answers towards. 

The pressures felt in the steel industry have brought all these issues into sharp focus, and finding solutions on these issues may help British and indeed European Union manufacturers fight for survival and thence a return holding their own in internationally competitive markets.  No matter the Chinese Trade Minister indicated with good grace that China would ' take an accommodative stance' - on the issue of subsidies offered by Chinese government to exporters, a lot of which are government corporations -  Britain and the European Union nations must, I believe, rise to the challenge of holding their own.  You should not count on policy adjustments by other nations - they may or may not - but certainly something should be done at home to make sure there is scope to survive in a globally competitive environment. 

Why do British consumers and industry tolerate energy prices which are said to be so high?  Could the energy suppliers see the good sense in reducing the price accordingly?  That would leave the consumers with a bit more of their hard-earned income so they may have for spending on other items, and keep those industries ticking over.  Other nations like China can issue subsidies to their exporters, why shouldn't Britain and the European Union offer subsidies to the steel suppliers at home?  With the current boom in the building industry, surely the steel industry at home should reap the benefits?  This can only happen if our industries can match the prices available internationally. 

These issues seek sensible solutions urgently.....otherwise I fear there may be contraction in the manufacturing sector, and that would of course impact the output and the GDP.  I trust the Ministers and the energy company bosses will do everything possible, as soon as practicable, to help avert a recessionary scenario. A few hours of straight talking, exchange of information, sensible calucations to pare the profits and perks for managers, and decisions by policymakers can ensure the nations will not have to spend sleepless nights worrying about such issues. 

Ladies and gentlemen, it is over to you now.  May your thoughts and words and actions be such as to bring joy to the people.  For that I pray.

Kind regards,
Duru-darshan

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