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British Steel liquidation order spurs UK, European supply concerns

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British Steel liquidation order spurs UK, European supply concerns

Some UK and European steel market participants said they fear disruptions to supplies after the compulsory liquidation of British Steel, ordered by the UK high court earlier in the day, although a government statement made it clear that the steelmaker will continue to trade and supply.

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UK and European buyers stressed the need "for full flexibility on supply sourcing," in the words of one. European steel association Eurofer called for policy makers to do everything they can to reinforce the whole of Europe's steel sector to safeguard its future.

UK distributor association NASS, said UK steel stocks are higher than normal due to Brexit uncertainty.

"So if and in case the company will exit from the market abruptly stockists will have materials, but what I think will be the problem in the event of the company not being able to continue operations is that in the medium term prices could decrease as other European longs producers will fight to take British Steel market share," said Martin Maley, NASS general director. The main problems eventually could be the supply of steel train rails and track shoes sections for yellow goods and wire rod, he said.

According to UK Steel Association data, British Steel produces 96% of the UK rail network's steel rail and the main customers of British Steel are Network Rail, JCB, Caterpillar and SNCF.

British Steel, as a major supplier to Network Rail, provides around 100,000 mt a year. "We have done what we can to help ease the company's financial difficulties," Network Rail commented.

"We have improved our order book with the company -- increasing rail production volumes, bringing orders forward and committing to a long-term schedule -- as well as offering immediate payment to ease the pressure on cash flow." Network Rail said.

Market sources also noted that due to the European steel import safeguards in place there is overall less material in the market that could be easily available, such as wire rod.

"This news comes at the worst possible moment because the quotas under the safeguard measures are virtually all exhausted for wire rod," said Kris van Ginderdeure, president of Eunirpa, the European non-integrated wire rod processors' association. If British Steel closes, rod availability will be even more limited in the EU open market, exacerbating the continuous shortage that the independent wire rod processing industry has been facing since 2016, van Ginderdeure stressed.

The UK high court Wednesday ordered that British Steel must liquidate after the company failed to secure emergency government funding, putting at stake 5,000 direct jobs and an estimated indirect 20,000 jobs. Owned by investment firm Greybull Capital, British Steel is the second-largest UK steel producer, with around 3 million mt/year of steelmaking capacity in the UK, France and the Netherlands. The company's main production site is in Scunthorpe where it has four blast furnaces, although only two are operating.

-- Annalisa Villa,

-- Edited by Richard Rubin,