British steel crisis deepens as SSI UK goes into liquidation

5 October 2015

Britain's steel sector crisis intensified on Friday as its second-largest steelmaker, SSI UK , went into liquidation after mothballing its Redcar plant in northeast England earlier this week and axing 1,700 jobs.

The decision to liquidate the Thai-owned company, confirmed by unions and sources close to the matter, puts another 300 jobs at risk as the company employs 2,000 people directly.

SSI UK has been hit by cheap imports, especially from the world's top steel producer China, and a slump in steel prices ST-CRU-IDX, which it expected would continue in the short term.

"We have just been informed that the board of directors has applied to the court to wind up SSI-UK and that application has been granted and SSI-UK is now in liquidation," Steve Readman of British union GMB said.

Britain's Department of Business Innovation and Skills (BIS) confirmed that it rejected a request from SSI for open-ended funding to keep the company's coke ovens running, saying it would have been in breach of EU state aid rules and that there was no business case to support the request.

"The company has never made a profit and the (SSI) board's proposal would do nothing to address the huge debts outstanding to local suppliers and other parties," BIS said in a statement.

When it announced plans on Monday to mothball the Redcar plant, SSI had hoped to keep its coke ovens running with a view to restarting operation at a later date if possible.

SSI UK and its parent, Thailand's biggest steelmaker Sahaviriya Steel Industries (SSI), were not immediately available to comment.

The Thai parent did say earlier on Friday that it had submitted an application to a Thai court to enter into a business rehabilitation for its debt restructuring.

The company has a $1.4 billion debt pile, built up in large part thanks to its purchase of the historic Redcar plant from Britain's largest steelmaker Tata Steel in 2011.

The closure of the Redcar plant, located near the industrial town of Middlesbrough, puts thousands of jobs indirectly related to steelmaking at risk in an economically deprived region of Britain.

The British government earlier on Friday announced an 80 million pound ($122 mln) package to support people at SSI UK who have lost their jobs.

A spokeswoman for BIS said the package would likely have "some flexibility to meet statutory redundancy payments" but added that most of the money would go towards retraining workers and supporting them to start their own businesses.

Accounting firm Price Waterhouse Coopers (PwC) has been appointed as special manager to assist the receiver.

"We will be seeking an urgent meeting with PwC," a spokesman for the union Community said. "Furthermore, we anticipate that SSI UK has failed to comply with its obligations under the UK information and consultation regulations and we will be taking legal advice."

PwC was not immediately available to comment.

The British government has acknowledged that the steel sector is in crisis, and pledged to talk to China about concerns it is flooding the market with steel priced below fair value.

Producing steel profitably in Britain is difficult due to cheap imports, a strong currency, plus high energy costs and "green" taxes imposed on heavy industry that are some of the highest in the world.

The sector currently employs fewer than 20,000 people directly, down from 200,000 in the 1970s.

"The government must now spearhead efforts to support the steel industry," Gareth Stace, director of industry lobby UK Steel, said. "The steel site in Redcar remains a viable and efficient plant and the government-led steel summit taking place in two weeks will be a make or break event for the entire industry."