Source: S&P Global Platts
The Chinese company Jingye is continuing to work toward closing its deal to purchase British Steel and is fully committed to close it by Q1, a spokesman for the company told to S&P Global Platts Wednesday. He also confirmed that Jingye has entered discussions with Barrett Steel, the largest steel stockholder in the UK, in order to sell four British Steel distribution centers to them, immediately upon the sale of British Steel to Jingye, pending the completion of the deal.
In an official statement, Barrett Steel said it is currently waiting for the sale of British Steel to be finalized. Barrett is hoping to secure British Steel Metal Centre sites including: Wolverhampton, Dartford, Newcastle and Scunthorpe, alongside offices in Cheadle and Edinburgh, according to the statement.
According to French unions, Jingye's representatives are also trying to convince France's government to back them and not block the sale of the British steel French unit, Hayange, in an effort to close the deal.
The spokesman for Jingye confirmed that company representatives visited the French mill and have pledged to invest Eur60 million over five years in Hayange. Among the investments being considered are a new line for finishing rails and an increase in the mill's output capacity. Production would be increased from 330,000 mt to 500,000 mt of rail. Jingye pledged a total investment for all British steel of GBP1.2 bln, as previously reported.
As reported, the French government's approval is also required for the sale of British Steel's Hayange plant. Sources close to the deal said that although the French government would never act against the UK government, they have put Hayange up for sale separately as a contingency plan in case the deal with Jingye does not go through.
A source close to the deal said Wednesday that three bidders have submitted their proposal for Hayange, among them there are special steel producer Ascoval and Liberty Steel. Both companies when approached by Platts did not comment. The steelmaker Ascoval recently won a bid in order to supply 140,000 mt of blooms for the manufacture of rails for SNCF at the BSFR rolling mill plant in Hayange in northern France.
UK rail demand outlook improving
The rail market in general is becoming more appealing, in particular after the UK government yesterday gave HS2, the high-speed rail line, the go-ahead.
According to market sources contacted by Platts it would make sense for British Steel to supply the steel for the HS2 project. According to the government's own projections, it will require at least two million mt of steel – much of which could be sourced from UK producers.
HS2 will require 1.3 million million mt of steel products during Phase 1 of construction and an additional 730,000 mt of steel during Phase 2, according to data seen by Platts Wednesday. Phase 1 will connect London Euston to Birmingham, while the Phase 2 is the rail from the West Midlands to Leeds and a western leg from Crewe to Manchester.
"It would make sense [for] British Steel to be the main supplier for the project; buying raw material from overseas is a waste of time and money," an industry source said. "Moving a rail can increase costs and is not so easy neither." Not only will British steel be able to produce the rails, but also the sections materials in its mill in Teesside, he added.
"In order to produce a railway you need not only rails but also sections for the infrastructure," the source said.
British Steel has a production capacity of 3 million mt/year at sites in the UK, France and the Netherlands.
British Steel's official receiver, when contacted by Platts said it "continues to work towards concluding the sale of British Steel." but did not offer further comments.