Union calls for Greybull to step aside

Trade union Community today called for British Steel to part ways with private equity firm Greybull Capital as a result of the steelmaker's imminent insolvency.

"In light of events over the past few weeks, it is clear that [British Steel's] future should not involve Greybull," said Community. "Greybull needs to do the right thing by getting out of the road and let those who are committed to our industry work together to save the business."

Among potential buyers is London-based Liberty Steel, which has been linked to British Steel's Scunthorpe plant. But Liberty is unlikely to take over other operations at the producer's Skinningrove and Teesside plants due to lack of efficiency, according to market sources.

Liberty would need a major debt package from the government to take over operations, something the government would be more likely to offer the current owners than an outsider.

Market sources suggest that Skinningrove in particular has been affected more by Section 232 than Brexit concerns. Skinningrove produces special sections, and business was hit by a drop in US demand, meaning the 300,000 t/y capacity mill is currently running at 75,000 t/y.

A similar scenario is playing out in Teesside, which primarily produces beams for export to markets such as the US. Demand for beams and special sections is also quiet domestically, compounding British Steel's low demand.

The company is also facing logistics challenges. The furnaces at Scunthorpe are located far from the rolling mills in Teesside, meaning competitors with integrated plants can easily undercut British Steel in prices.

Many European mills are taking advantage of this scenario with the low demand in Europe, especially since the majority run electric arc furnaces instead of having to depend on raw materials such as iron ore — as British Steel does.

The iron ore market is extremely constricted at the moment because of various issues with supply from Brazilian mining firm Vale. This pushed the Argus ICX to a five-year high of $101.40/dry metric tonne on 17 May.

British Steel did not respond to requests for comment.