25 April, 2021 #Business

Opinion: The UK Steel Industry Is Better Prepared To Deal With The Impact Of A Second Lockdown

According to market sources, stakeholders in the UK steel industry are likely to face less severe impacts once the second lockdown in England that is scheduled to start on November 5 comes into effect. The second lockdown is part of Government efforts designed to curb the soaring spread of COVID-19 infections countrywide.

During the period that the lockdown is in effect, steel manufacturing industries, manufacturing sites and construction sites will remain open. However, once the lockdown starts, car showrooms will be closed which could signal major losses in the automotive manufacturing sector. This is according to sources contacted by S&P Global Platts. IF you are looking for scaffold hire look no further than APL Kwikform

When contacted, a spokesperson for Tata Steel Europe – The steel conglomerate that owns major shares in Port Talbot Steelworks in Wales had the following to say: “Since the industry has been affected by closures announced in the second lockdown, it is unlikely that sales will be impacted. The latest changes announced by Government officials do not touch on the steel industry since we have already implemented the strongest safety measures to avoid the spread of COVID-19.”

The impending lockdown will only affect England since Scotland currently has a 5-tier COVID-19 Alert System as of November 2, Wales has a lockdown in place that is due to end on November 9, and, Northern Ireland has a month-long lockdown that is scheduled to be lifted on November 13.

When contacted, Gareth Stace – The Director General of UK Steel (The association that controls the UK Steel Sector) had the following to say: “Steel companies in the UK will continue with their normal operations while taking into account all the strict guidelines to curb the spread of COVID-19 that have been introduced by the authorities. As of March, players in the UK steel industry have made all the necessary plans to support the Government in curbing the spread of the pandemic… The support provided by the industry may vary. For example, industry players are ready to adapt their manufacturing plants and prioritize the supply of any specialist materials that may be requested by the authorities.”

According to Gareth Stace, the industry took all the necessary precautions to ensure that the 30,000 workers in the steel industry were protected from the risk of infections. The steel industry in England usually produces around 7.3 million tonnes of steel annually which caters for 65% of all steel needs across the UK.

In an analytical piece published by the Financial Times, consumers of steel are expected to delay steel orders instead of cancelling them as it happened during the first lockdown. This is because unlike the first lockdown that lasted for nearly three months (From late March to mid-June), the second lockdown is only expected to last for just a month.

Pierre Veryet who works as a technical analyst at ActivTrades – A London brokerage firm echoed the sentiments in the Financial Times. In a bulletin published on November 3, he opined that the repercussions being felt in equity markets across Europe may best be attributed to the impending US Presidential election rather than the lockdown. “The market changes may also indicate that investors have already anticipated what will happen after the latest lockdown measures in Europe and they are already laying plans for the future. This is essentially what happened during the first lockdown in March. The shares in steel companies made last week have already boosted share prices making investments more attractive to people who are eyeing the recovery period,” he said.

However, despite the optimism by most industry players, On November 2, the National Institute of Economic and Social Research revised its projections for economic growth in the UK and indicated that the GDP may experience a contraction of 10.5%. If the authorities get a no-deal Brexit, the forecasts show that the UK economy may reach Q4 2019 levels in Q4 2023.

What Will the End of The Brexit Transition Mean for The UK Steel Industry?

As it is, the steel industry in the UK remains wary because there was a 22% dip in domestic consumption of steel in Q1 & Q2 of 2020 because of the COVID-19 pandemic.

Gareth Stace had the following to say: “Once the new lockdown comes into effect, it is likely that we are going to lose all the gains we have made towards recovery as an industry since June. To protect all the stakeholders in the steel industry, the Government must push forth a major economic stimulus program that will increase the demand for steel products in 2020 and 2021. This is the only way to help the industry recover from the losses they incurred because of the pandemic. Additionally, we are also counting the days to December 31 when we finally leave the European Union.