Posted on 10 Mar 2020
Private sector Chinese steelmaker Jingye Group has completed the acquisition of British Steel's UK and Netherlands assets from British Steel's official receiver and will expand the company's steelmaking capacity with a move into electric arc furnace steelmaking at Teesside, Jingye announced Monday.
Jingye said in a statement it will also build a new rebar line, enhance the current rail mill and invest in British Steel's rolling mills to produce high-quality steel products to optimize its product portfolio.
Jingye's pledge to invest GBP1.2 billion ($1.58 billion) to place British Steel's business on a more competitive and sustainable footing is aimed at returning the company to industry-comparable margins within five years, the Chinese company said. British Steel is currently a major producer of rails and is expected to benefit from the UK government's decision to proceed with the UK's HS2 high-speed railway project.
Jingye will also construct a new 250-MW power plant to serve the Scunthorpe site, where British Steel has four blast furnaces, of which two are currently in operation, a Jingye spokesman said.
The plan is now to restart the site's third blast furnace while the second is relined, so two blast furnaces will continue in operation, the spokesman said.
The new power plant is expected to be around a third more efficient than the one it replaces, Jingye said.
UK Business Secretary Alok Sharma described the sale of British Steel, which entered compulsory liquidation May 22, as "an important vote of confidence in the UK's steel industry. It also marks the start of a new era for those regions that have built their livelihoods around industrial steel production."
Gareth Stace, director general of UK steelmaking association UK Steel, called completion of the sales process as "fantastic news for British Steel and its workforce. British Steel is a major strategic asset, representing over a third of Britain's steel production."
The completion secures the future of approximately 3,200 jobs and follows the agreement of new terms with customers and suppliers. A further approximately 100 jobs will transfer to Barrett Steel following the sale of four British Steel distribution centers.
British Steel has about 3 million mt/year of production capacity in the UK, France and the Netherlands.
As previously indicated, assets included in the Jingye transaction include British Steel's steelworks at Scunthorpe and UK mills at Teesside Beam Mill and Skinningrove, as well as subsidiary businesses FN Steel in the Netherlands and TSP Engineering.
"It does not include British Steel's French operations at Hayange, the acquisition of which is still subject to further negotiations with the relevant authorities in France and is hoped to be concluded separately," Jingye said.
Sources, however, told S&P Global Platts last week that four other bids have been received for Hayange, from ArcelorMittal, UK-based industrial group Liberty House, special steel producer Ascoval (through its holding company Olympus), and German steel producer Saarstahl.
The French government, which considers Hayange to be a strategic national asset, put it up for sale last year separately, as a contingency plan in case Jingye's purchase of British Steel did not go through.
Hayange produces 250,000-300,000 mt of rails per year, mostly for SNCF, France's state-owned railway operator. The mill currently rolls blooms produced at British Steel UK in Scunthorpe.
While formal numbers of job losses at British Steel were not announced in Monday's statement from Jingye, these were described as "heartbreaking" by the UK's GMB union, while Jingye Group CEO Li Huiming also commented on the difficult negotiations that had preceded Monday's completion.
"It has not been an easy journey since we first announced our intentions in November but the longer I have spent in Scunthorpe, the more I have come to believe in the successful future of these steelworks and the employees that have made them famous throughout the world," Huiming said. "Together, we can forge a new partnership that will mark the beginning of a new illustrious chapter in the history of British steelmaking."
Business Secretary Sharma added he wanted "to reassure British Steel employees who may be facing redundancy that we are mobilising all available resources to give immediate on the ground support and advice to those affected."
Charlotte Childs, a GMB union official, said in a statement: "This deal is worth pursuing to safeguard UK steel for future generations. But, for the UK's steel industry to have a long term future, we still need more Government assistance on energy costs to compete with European competitors, as well as domestic procurement orders."
Source:S&P Global Platts
