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COMMENT: What are Jingye Groups’ Plans for British Steel?

Dr Jonathan Owens, a logistics expert from the University of Salford Business School, has shared his thoughts on the £70 million buyout of British Steel by a Chinese steel producer.

The struggling steel manufacturer has endured a tumultuous 2019 following a sustained period of financial loss which has threatened a reported 5,000 jobs in the UK as well as endangering the livelihoods of 20,000 others caught in the supply chain.

Originally intended to be bought out by Turkish army pension fund Oyak in August, British Steel was effectively saved from collapse following the £70m deal in principle by Jingye Group to potentially save thousands of jobs at British Steel.

Dr Jonathan Owens – Logistics expert from the University of Salford Business School

Highlighting the reasons why the struggling steel manufacturer was an attractive proposition for both Oyak and Jingye Group, Dr Owens (pictured) said: “It is not perhaps surprising that both the Jingye group and the Turkish pension fund were committed on investment at Scunthorpe, by utilising the high-quality steel that is manufactured at Scunthorpe to complement their existing specialisms and concentrations within the volume market.”

Dr Ownes asserts that while it would be ‘interesting’ to understand what Jingye Groups recovery plans are, this must not be a short-term investment or a ‘benchmarking and knowledge stripping exercise.’

The Salford-based logistics expert suggests that: “One strategic viewpoint could be to develop [the] capacity for subsidised raw material into the UK market, which may be likely in the long-term not to be subject to high EU tariffs”.

There is a very real threat of high EU tariffs following a Brexit decision, and this undoubtedly played a part in the purchase of British Steel by Jingye. Dr Owens also theorises that this could be a way for the Jingye Group to ‘enhance leverage’ in the UK economy as well.

Beyond access to lower tariffs and leverage into the UK economy, Dr Owens also highlights the value of Scunthorpe as a steel manufacturing port, stating: “Scunthorpe was initially the first to develop and apply technology that allows the production of high-grade steel with better reliability. In the past, it has successfully fended of cheaper imports from China. Whilst other steel mills around the world have applied similar technologies, Scunthorpe is still considered ‘world-class’ and the most experienced plant utilising this technology, and it still supplies Network rail for the UK’s railway track infrastructure today.”

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