Worker during steel casting
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LONDON – Chinese company British Steel said it may cut up to 260 UK jobs as a result of the proposed closure of its Scunthorpe coke ovens as steelmaking in Britain remains “uncompetitive” despite cost cuts.
“We have taken cost-cutting measures as part of our review; however, UK steelmaking remains uncompetitive compared to other international steelmakers,” British Steel CEO Xifeng Han said in a statement emailed to CNBC.
“Our energy costs, carbon costs and labor costs are some of the highest in the world, factors that we cannot directly control.”
Chinese steelmaker Jingye Group bought British Steel in March 2020 and says it has invested £330 million ($399 million) in capital projects in the first three years of ownership. British Steel employs 4,700 people, of which 4,300 are based in the UK.
Last year the company announced a £120m increase in its energy bill and a £70m increase in annual carbon costs, saying “decisive action” was needed due to rising running costs.
“Jingye is committed to our long-term future, but decarbonisation is a major challenge for our business and, like most companies, we face significant challenges due to the economic slowdown, rising inflation and extraordinarily high energy prices,” the company said.
Energy costs have risen sharply over the past year as sanctions in response to Russia’s invasion of Ukraine tightened Europe’s access to Moscow’s supplies.
According to national media reports, the government is in lengthy discussions about a £300 million support package for British Steel.
“It is very disappointing that British Steel has decided to take this step for its employees while our negotiations with the sector are ongoing,” a UK government spokesman said by email. The British administration has been negotiating an agreement on a long-term solution with British Steel in recent months.
“Negotiations over a support package for our steel mill worth hundreds of millions of pounds are still ongoing with the government. So I am deeply disappointed that Jingye has made such a commercial decision to lay off so many staff,” Holly said. Mumby-Croft, Member of Parliament for Scunthorpe, in a statement.
“Jingye’s actions raise questions about their commitment to our steelworks and their commitment to the community they are a part of here in Scunthorpe.”
Unions condemned the announcement and warned of long-term industrial risks and potential strike action:
“We will not accept redundancies and nothing is off the table when it comes to protecting our members’ jobs,” said Alun Davies, national officer of the Community of Steel Unions. in the statement.
“British Steel’s plan to close the coke ovens could have a catastrophic impact on jobs and steelmaking in Scunthorpe and the UK as a whole,” he said, adding that the company could now depend on “unreliable imported coke” and threaten Britain’s ability to to produce British steel for the nation’s infrastructure.
Unite called on British Steel must provide further information about Scunthorpe or face potential industrial action.
“This union has yet to see any financial justification for the closure of the coke ovens. British Steel needs to clean up and open its books to try and justify its decisions,” said Linda McCulloch, Unite’s national director. “Unite will seek to defend members’ jobs at British Steel,” he added.