Tata Steel UK has issued a stark warning that the domestic steel sector will continue to face significant challenges despite the introduction of a new quota and tariff regime on imported steel. The company's chief executive, Rajesh Nair, expressed deep concern over the implications for the long-term competitiveness, sustainability, growth, and future investment outlook for the UK steel industry.
From July, the UK Government will reduce the tariff-free quota level for steel importers by 60% compared to current arrangements. This change will double import taxes on steel entering the UK above those levels, increasing from 25% to 50%. The measures are part of the government's ambition to ensure that 50% of the steel used in the UK is produced domestically, up from the current 30%.
Concerns Over Quota Volumes
Tata Steel UK has raised specific concerns about quota volumes in several product categories, including metallic coated steels, packaging steels, and hollow sections. The company argues that these quotas will continue to permit significant import penetration and do not adequately reflect underlying UK market conditions or the pressures facing domestic steel producers.
Rajesh Nair stated: "A sustainable domestic steel industry depends on a policy framework that supports investment, protects jobs and provides a level playing field for UK steel producers. Steel remains a strategically important foundational industry for the UK economy and wider manufacturing base. We do not believe the final quota levels published reflect UK market conditions or the pressures facing the domestic steel industry. In several categories, the quota volumes continue to allow significant import penetration into strategically important UK steel markets, exposing domestic production and supply chains to continued pressure."
Investment and Delays at Port Talbot
Tata Steel UK is currently undertaking a £1.2 billion investment, which includes £500 million in backing from the UK Government, to build a new electric arc furnace at Port Talbot. This follows the end of heavy steelmaking last year with the closure of the site's last blast furnace. The arc furnace will produce steel from scrap steel and was originally scheduled to become operational next year. However, it is now facing a delay of six to 12 months due to connection issues with the National Grid.
Nair added: "If the government’s ambition of building a sustainable steel industry capable of supplying 50% of UK demand is to be realised, quota arrangements will need to provide adequate support for domestic steel producers and support the long-term growth of the UK steel sector. We are disappointed by elements of the final framework announced and we are very concerned about the implications for the long-term competitiveness, sustainability, growth and future investment outlook for the UK steel sector. We expect the Government to reconsider aspects of the framework and continue working with the UK steel sector to ensure a level playing field that supports domestic production, protects employment and strengthens the wider UK manufacturing supply chain."
Government Response and Industry Reactions
In a statement to the Commons earlier this week, trade minister Sir Chris Bryant, MP for Rhondda and Ogmore, defended the measures. He said: "Canada, the United States, and the European Union have already put in place similar toughened measures to protect their industries. So if we do nothing, or if we delay introducing new measures, we will immediately become the global dumping ground for cheap steel across the world. Again, I say that would mean the end of UK steel production."
Sir Chris also noted that the total quota volume will now be 3.2 million metric tonnes, an increase of over 560,000 metric tonnes of steel that can be imported tariff-free compared to provisional volumes, representing a 21% uplift. He explained that the government had listened to industry and increased quotas in several instances to more accurately protect categories of steel manufactured in the UK, while acknowledging that the European Union remains the largest export market for UK steel.
Shadow business secretary Andrew Griffith warned that the 50% tariff rate "will do great damage to British manufacturing, to housebuilders and those who construct the nation’s infrastructure." He welcomed concessions made by the government but expressed concern over steel import codes used by aerospace and space sectors, arguing that defence firms would face higher costs.
William Bain, head of trade policy at the British Chamber of Commerce, commented: "These amendments are a welcome tilt towards the needs of the UK’s downstream steel users, employing 300,000 people in the UK. They were facing large additional import costs from next Wednesday and the quota changes, for downstream users in category one steel products in particular, will lessen the blow. Overall, the changes will reduce the proposed quota cuts from 60% to 51%, which aligns more closely with the EU’s plans. There is a significant increase in the previously proposed tariff free quotas to 3.2m tonnes. This is real move forward from the original proposals, particularly for category one products. But the government is walking a precarious tightrope in trying to balance the needs of steel producers and users and its hand has been forced by the actions of other global players. There will still be many losers. The government has committed to review these measures in a year’s time but should act more quickly if firms face severe financial distress. We will be speaking to firms in our network to gauge the impact these revised quotas will have on costs and jobs. If the pain is still felt to be too severe we will be seeking further action on changes to the quotas and an extension to easements. Although the government has listened and addressed real business concerns, the dialogue must continue to be responsive to the needs of thousands of downstream steel firms."
