North-east scrap metal merchants are reeling from the closure of the Redcar steel works, with some companies said to be out of pocket by hundreds of thousands of pounds.
Steel producers Sahaviriya Steel Industries UK (SSI) announced that it would end production at its iron and steel-making facilities on Teesside with the loss of 1,700 jobs on Monday.
A year ago MRW reported concerns in the national press that auditors had warned about the viability of the plant but SSI played down these fears (see below).
Because traditional scrap suppliers had previously complained about difficulties in being paid, a third party organisation was set up to handle supplies to the plant.
Tom Bird, managing director of Mettalis Recycling, said: “It’s never good when a domestic consumer ceases to exist but, to be honest, in terms of SSI it isn’t a secret that there have been issues with payment. It was difficult getting paid so it is not a huge surprise for people, although it is very sad.”
Bird, who is also president of the European Ferrous Recovery and Recycling Federation and board member of the Bureau of International Recycling’s ferrous division, also said that cheap Chinese billet was having a big impact on steel producers and was “dampening” prices across the world market. The closure of SSI was a part of this phenomenon, he argued, although it would undoubtedly have effects locally.
One anonymous scrap dealer said it had limited its contact with the plant by choosing not to supply, particularly since ownership switched from Tata which had mothballed it in 2010. “When you have an investor that opens a company under a different banner it sets alarm bells. So you try to manage your exposure to it. We have tried to shy away from it.”
John Cumberland, managing director of Waste Stream Metal Recycling in County Durham, said many businesses could not get insurance to supply to the steelworks because the cost was “prohibitive”.
He said his company had no dealings with SSI but he knew of colleagues and businesses owed substantial sums.
“I know a lot of people who wouldn’t deliver to them. I have heard some people are owed quite a few hundreds of thousands in scrap metal, and it’s been mentioned in the millions for some people,” he said.
“It is an absolute disaster for steel workers across Teesside, but the biggest disaster was when it opened because it gave people false hope.”
Cumberland argued that the cycle of opening and closing at the site could not continue.
“We would like to see steel made in the north-east. The problem I have is that people get on their soapbox saying the Government should bale them out as they have, rightly, in Germany and Italy.
“But this company is a Thai company and they have had plenty of incentives. They have the UK order book and they can make cheap steel.
“It is just a black hole because every three or four years it closes and the people who work there get made redundant. How long can you do that for? It’s a dreadful situation and it always happens at this time of year coming up to Christmas.”
One merchant added: “Closure of the Teesside steelworks won’t help talk of a further £15-£20 price drop [which has now] changed into fact. The regional variation is even higher: the further north the lower the price. With all commodities taking a battering and the mining giants looking shaky, nothing is looking good.”
Scrap dealer Frank Hanratty said: “Despite what the Government is saying, we are still in a recession. The only area in the country that isn’t in the recession is London.
“Around this area we are in the worst recession in living memory – we are living in a wilderness. So consequently regarding plans for the future, you have to tighten your belt up and hope for the best.”
A year ago - what MRW reported
The Sunday Times said that accounts for Thai company SSI showed a pre-tax loss of $309m (£194m) in 2013 on top of $476m lost in 2012.
In response, SSI UK said the financial performance during 2014 had continued to improve, and in June a positive monthly EBITDA result was achieved for the first time since the plant was restarted in April 2012.
A company statement said: “This trend … is continuing and, with the support of the parent company, key stakeholders and suppliers, we are confident of achieving our goal of SSI UK becoming established as a viable and sustainable business.”