[News] British steel

I'm willing to be convinced that Brexit has anything to do with BS's problems. China is set to record 1billion tonnes of steel production for the first time this year. How are BS to compete with this? Isn't it a bit like having a corner shop right next door to a Tesco Extra?

Mellor 3 Ward 4 said:

On this one can't see how Brexit is to blame?

They say they have lost export markets - yet the fall in Sterling has made exports between 15 -20% cheaper?

I think the world oversupply of Steel, hence falling prices globally, and cheap Chinese Steel are more the problem.

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Because of the uncertainty. Non-UK customers don't know what tarrifs will be applied to British Steel from November (or whenever) onwards, so have hardly made any orders.

The 68% in Lincs beleived the bullshit that 'we hold all the cards' and it'd be the 'easiest deal in history' and won't have considered potential crash out on WTO. This scenario would've been dismissed as so-called Project Fear.

nwgull said:

Because of the uncertainty. Non-UK customers don't know what tarrifs will be applied to British Steel from November (or whenever) onwards, so have hardly made any orders.

The 68% in Lincs beleived the bullshit that 'we hold all the cards' and it'd be the 'easiest deal in history' and won't have considered potential crash out on WTO. This scenario would've been dismissed as so-called Project Fear.

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It will be interesting to see how this region votes tomorrow in the Euro elections on the back of the comments from British Steel about Brexit. I suspect it will be another 68% vote for the leave parties, mainly for The Brexit Party. The only saving grace is when they do lose their jobs there will be plenty of work picking fruit and veg in nearby Boston as the EU workers are leaving in droves.

nicko31 said:

Another one Brexit has pushed over the edge.

Better get used to this kind of stuff, just the tip of iceberg if we go for the Jacobs Rees-Mogg route.

We're learning a very painful lesson, unless you're a disaster capitalist...

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Oh dear, you really believe in what have just posted don’t you? Why is it radicalised, remain extremists like yourself take such joy in good people losing their jobs? Just imagine, if,as promised 108 times in Parliament, we left the EU on the 29th of March, this Government just might be able to offer a bail out package.


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Baker lite said:

if,as promised 108 times in Parliament, we left the EU on the 29th of March, this Government just might be able to offer a bail out package.


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It's a private business, get over it.

Incidentally why don't you think this is Brexit related? I know Brexiteers are suddenly masters of business and understand the ins and outs of economy. But is it so much of a stretch to think that perhaps the uncertainty around Brexit, Tarriffs, Export, Pricing etc might just have put off people making longer term orders with the company? My limited understanding is a lot of steel is ordered years in advance...

Publius Ovidius said:

Just seen that it is to enter “ insolvency “, not even administration!

Blimey.

I can’t see the government be keen on renationalising the operation.

For some of us a a certain age, British steel was one of the cornerstones of our economy. My father worked for British steel in Sheffield and even in those days there were dire warnings about cheap steel from Eastern Europe at the time. Turns out it was China and India they needed to worry about.

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My father in law was made redundant in 1996 from Magna which was then turned into an industrial museum.

Springal said:

It's a private business, get over it.

Incidentally why don't you think this is Brexit related? I know Brexiteers are suddenly masters of business and understand the ins and outs of economy. But is it so much of a stretch to think that perhaps the uncertainty around Brexit, Tarriffs, Export, Pricing etc might just have put off people making longer term orders with the company? My limited understanding is a lot of steel is ordered years in advance...

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Wait a cotton picking minute - are you suggesting for one minute, that there could possibly be a steel futures exchange - where businesses take a punt on the future price of metals, to try and offset wholesale price increases/decreases to support their future plans so that surprising price rises/drops don't damage their business plans? I don't believe it. Why the hell would businesses do that, AND also buy years in advance. This whole economics thing is so damned hard to understand.......

Oh wait - https://www.lme.com/en-GB/Trading/Contract-types/Futures#tabIndex=0

A whole exchange in London - never!

Brexit may not be the entire reason for this failure, but it's certainly the ****ing forest which broke the camels back.

narly101 said:

Wait a cotton picking minute - are you suggesting for one minute, that there could possibly be a steel futures exchange - where businesses take a punt on the future price of metals, to try and offset wholesale price increases/decreases to support their future plans so that surprising price rises/drops don't damage their business plans? I don't believe it. Why the hell would businesses do that, AND also buy years in advance. This whole economics thing is so damned hard to understand.......

.

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Does that take into account changes in export duty etc then or just the material itself ?

This hasn't aged well.

[tweet]716184709496180736[/tweet]

British Steel has already secured a government loan of around £120m this month to enable it to comply with the European Union’s Emissions Trading System (ETS) rules.

Springal said:

Does that take into account changes in export duty etc then or just the material itself ?

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Just the price of the material, but you mentioned buying in advance, and doing so makes economic sense (alongside a futures contract) where you want to ensure that your future business plans are as robust as possible.

Having Brexit throw a spanner in future export duty costs, transportation costs, and uncertainty around sterling, would make anyone thinking about buying steel from the UK, look elsewhere.

narly101 said:

J
Having Brexit throw a spanner in future export duty costs, transportation costs, and uncertainty around sterling, would make anyone thinking about buying steel from the UK, look elsewhere.

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nicko31 said:

You sound like you've just got off the phone to Andrea Leadsom

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she does great phonesex to, only had to say im taking back control, will of the poeople and I lasted about as long as Gemma Collins Easter egg before shooting my duff

Regards
DR

Still might be a rescue possible if we leave soon,and no longer stick to EU regulations on industrial financial subsidies.As long as the furnaces are kept running,there's still hope.If we had ignored the climate change induced regulations, like the Germans do with their coal-fired power stations,it might have gone better.

I wonder how many steel workers or the towns people of Scunthorpe will vote Brexit Party tomorrow or have not given a toss about people on Universal Credit ? Just shows nobody knows for sure what may happen to you and your family at a moments notice these days.

Two Professors said:

Still might be a rescue possible if we leave soon,and no longer stick to EU regulations on industrial financial subsidies.As long as the furnaces are kept running,there's still hope.If we had ignored the climate change induced regulations, like the Germans do with their coal-fired power stations,it might have gone better.

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You read recently that the climate change warnings on sea levels were conservative when they were first issued right? and that we could be looking at 2m rather than 1m of sea level increase by 2100?

Now read your post again.

Publius Ovidius said:

Look forward to reading that.
There was a rumour that BS supplied 95% of the rails for National Rail and they had been told to reduce their prices as even though the pound had fallen on its arse, it was cheaper to buy rails from Brazil?

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British Steel has been very poorly managed, there had been no real long term plan and everything was basically a day-to-day firefight. I probably will get in trouble with what i'm about to say, but people need to know.

I left in March 2018 as I was concerned the direction the company was heading in was exactly this. I just thought it would happen sooner. The real concerns actually began in mid 2017. They have 4 blast furnaces, 1 is mothball, 1 on standby and 2 in operation. Due to a poor procurement idea, they bought coke with a higher than preferred moisture, as such the blast furnace was not as hot as it could be and the result was that the slag hardened. The blast furnace had to be stopped for repair (I am unsure as to why the stand by wasn't ignited) - as a result, 50% of their iron making capacity was reduced. This obviously had a massive impact on their ability to meet demands.

British Steel had a few forms of credit lines, mainly an Accounts Receivable trade finance with an 15% haircut and dependent on currency (USD, GBP and EUR) interest rates on this facility varied. The primary concern about the AR Facility was the payment terms in which we were giving customers at the time were absolutely ridiculous and really did not reflect their company's credit rating. Some customers were on payment terms of up to 120 days. Many on 60/75. Most never paid on time. Furthermore, our suppliers would not really offer us anything more than 30 days, so you can see from a cash flow perspective the immediate problem.

Additional problems also arose from concentration limits on said AR facility, we couldn't borrow anything more than 15% of the total invoices sent to our largest customers (this was subject to our 15% haircut, so reality was 13.5% of our invoices sent to them, were able to be drawndown - the remaining went into the AR Facility's account to effectively pay them.

All stock on site was securitised; in the form of an Asset Backed Lending facility (ABL). This fluctuate as we had to report each month our stock, again with a haircut and large interest rates attached. The problem with this was we had a minimum headroom we had to maintain. So this fund was rarely ever touched.

Assets on site were largely worthless, due to their age.

You also had commodity trade finance, as you may have read from the news the primary sources of coal was from Vale in Brazil and some Australian company. Again, a 15% haircut on the product. None of this was managed particularly well.

So anything worth anything the company was securitised, there was effectively no way to refinance and finance operations based on product.

Then you have the board, morons. I was once told by the finance director that the ABL and AR facilities were the same thing, it is very clear from the outset that they are not the same thing. He was later told he was no longer wanted as Finance Director. He somehow stuck around... Greybull headhunted three chaps, Gerald Reichmann as CFO, now CEO. Peter Bernscher as CEO and some Turkish bloke as COO. Peter and the Turk 'resigned' from their positions within 6 months. The truth is they were forced out by the old guard. Announcement made on the 21st December 17:00 so he could go quietly as everyone was closing up shop for the christmas period.

Between November 2017 and January 2018, the company went through a serious cash flow crisis. My team, the treasury were effectively frozen out of the cash flow forecasting, which was left to one lad who was nice enough - had absolutely not a bloody clue as to what he was doing. I once spent an hour trying to explain the point of FX hedging. I failed...

During this period, the board appeared more concerned about the subsequent replacement to Peter as CEO (Eye-watering salaries were being paid too) - rather than concentration on securing new credit lines to get the company through a traditionally choppy period exacerbated by lower than normal orders. At this point, the government did signal they would be a guarantor for any future loans and we were apparently in talks with a bank at this period. I can't say if they secured it or not as I left the company soon after.

Senior management were not particularly well received in the company, asking anyone on the floor and they wouldn't trust most of them ordering a cup of coffee correctly for them. There were some decent Finance Managers there, Alex (won't say his second name) was a gentlemen who spoke to people with respect and knew what he was doing but I didn't think he trusted the finance director.

CapEx was generally high, but there was no attempt to control costs or anything; there were regularly stores about how resources would go missing. Debates would then spark about whether there's a recording issue in that they've consumed more than they thought, or they had GENUINELY LOST the coal.

There was no long term plan, no strategy and no vision beyond what the board could do to make them sound better and justify their large salaries.


Commodity and liquidity risk management were non-existent. EUAs repo'd until after June - just to make a few million €s.

At least their policy of 100% Hedging ratio on FX exposure meant they always knew what price they would get for €/£ irrespective of market movement..

Baker lite said:

Oh dear, you really believe in what have just posted don’t you? Why is it radicalised, remain extremists like yourself take such joy in good people losing their jobs? Just imagine, if,as promised 108 times in Parliament, we left the EU on the 29th of March, this Government just might be able to offer a bail out package.


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You've already ignored my previous comment about this.

This is bullshit.

State aid isn't an issue. State aid becomes an issue when government intervention could distort the market. Bailing out British steel would not distort the market. UK State aid is about 0.34% of GDP, whereas France's is 0.76% of GDP.

The government has already bailed out British Steel to enable them to buy enough EUAs to cover the EUETS.

You don't know what you're talking about.

Brighton Lines said:

I thought it was returning a surplus recently.

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Made a profit in the FY17 of about £50m. Subsequently, poor management derailed this.

Springal said:

Where has the £75M come from? Did they not get a government loan recently for £120M?

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Loan was for EUAs to pay the EUETS Carbon tax. £75M is required to keep the company afloat for n amount of time.

theboybilly said:

I'm willing to be convinced that Brexit has anything to do with BS's problems. China is set to record 1billion tonnes of steel production for the first time this year. How are BS to compete with this? Isn't it a bit like having a corner shop right next door to a Tesco Extra?

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British Steel doesn't compete with Chinese steel; British Steel makes more niche and specific products than steel beams.

Two Professors said:

Still might be a rescue possible if we leave soon,and no longer stick to EU regulations on industrial financial subsidies.As long as the furnaces are kept running,there's still hope.If we had ignored the climate change induced regulations, like the Germans do with their coal-fired power stations,it might have gone better.

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What regulations are you talking about? BS has already received a package from the Government.

Publius Ovidius said:

There was a rumour that BS supplied 95% of the rails for National Rail and they had been told to reduce their prices as even though the pound had fallen on its arse, it was cheaper to buy rails from Brazil?

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Couldn't possibly comment on that aspect, but British Steel spent millions on R&D on rail products, I highly doubt they were going to budge on price.