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British Steel on verge of administration: Impact on Network Rail?

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jfowkes

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From the BBC (other news services are available):

https://www.bbc.co.uk/news/business-48347371

I note that in the article it says:
"One of its biggest customers is Network Rail, 95% of whose rails are supplied by British Steel's Scunthorpe plant."

If the British Steel were to go into administration how much would it affect the work of Network Rail?

Just curious.
 
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furnessvale

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From the BBC (other news services are available):

https://www.bbc.co.uk/news/business-48347371

I note that in the article it says: "One of its biggest customers is Network Rail, 95% of whose rails are supplied by British Steel's Scunthorpe plant."

If the British Steel were to go into administration how much would it affect the work of Network Rail?

Just curious.
A sudden collapse could cause a hiccup but there are a number of manufacturers in Europe who could fill the gap quickly.
 

LNW-GW Joint

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One of the Scunthorpe successes in recent years has been their export of steel rail to France for their new high speed lines (finished at Hayange).
It also generated useful Channel Tunnel rail traffic.
The current difficulties are said to be export-related and might be about the French contract, in the light of Brexit uncertainties (timing, tariffs etc).
The no-deal Brexiters should be careful what they wish for.
 

superkev

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The current difficulties are said to be export-related and might be about the French contract, in the light of Brexit uncertainties (timing, tariffs etc).
The no-deal Brexiters should be careful what they wish for.
My thoughts entirely. I believe the EU which after all is a union has around a 40% tariff on non EU steel. Leave any union at your peril.
Coincidentally I had a most excellent guided steam rail tour round Scunthorpe last Saturday. These are free, take 3 hours and must be one of the UK's best kept secret.
See http://www.afrps.co.uk/
Most impressive but sad to see so much deriliction and lack of investment with a lot of the site looking very old indeed.
K
 

HSTEd

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Assuming the Network Rail work is profitable, the administrators will probably run off a large batch of rails before they start shutting the plant down.
 

superkev

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I believe some rail has to be shipped to France anyway for heat treatment or something as there industrial electricity is half the cost of ours.
Clueless politicians I hate them all. Sorry for moan.
K
 

furnessvale

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I wondered how long before someone brought Brexit into a straightforward question about how NR could be affected by the loss of a UK based supplier.
 

edwin_m

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I wondered how long before someone brought Brexit into a straightforward question about how NR could be affected by the loss of a UK based supplier.
It's fully within the scope of the thread as defined by the title. Not discussing it would be like debating why electrification is being cancelled without mentioning DfT.

You can shut it out as much as you like, but the reality is that the prospect of Brexit is destroying real jobs and damaging real people, many of whom are in some of the areas that voted most strongly for it.

Edit: I see someone has changed the title since I wrote this, to refer only to the effect on Network Rail. I don't see why my view should be suppressed here so I'm leaving this post but will post something on the referendum thread too.
 
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Maurice3000

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If they collapse the administrators will probably try and sell of the bits that are still profitable and not impacted much by Brexit. That could include rail for NR.

The problem may be that it might be hard to run a profitable business when exporting becomes harder post-Brexit. Is a dedicated plant for producing long products solely for domestic consumption viable?
 

Altfish

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If they collapse the administrators will probably try and sell of the bits that are still profitable and not impacted much by Brexit. That could include rail for NR.

The problem may be that it might be hard to run a profitable business when exporting becomes harder post-Brexit. Is a dedicated plant for producing long products solely for domestic consumption viable?
They could nationalise it.
 

jfowkes

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OP here, just to say it wasn't me that changed the thread title! I don't really personally mind where discussions lead as long as it's interesting and civil.

But moderators opinions may differ.
 

Bald Rick

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If they collapse the administrators will probably try and sell of the bits that are still profitable and not impacted much by Brexit. That could include rail for NR.

The problem may be that it might be hard to run a profitable business when exporting becomes harder post-Brexit. Is a dedicated plant for producing long products solely for domestic consumption viable?

The trouble is that blast furnaces are chunky bits of kit. You can’t sell half of one.
 

Maurice3000

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The trouble is that blast furnaces are chunky bits of kit. You can’t sell half of one.
Obviously, they could cut them up for melting into rail ;)

I was not actually referring to bits of the plant but bits of the operation. If the part of the operation that produces rail for Network Rail is still viable because they have a long term domestic customer then that might get sold on. Meanwhile the operations that were only viable in a time when they could still easily export would go into administration.

That would leave the challenge of some of the rail making process taking place in France. Brexit would raise the cost of doing that and would require the industry to calculate whether to absorb those costs or whether it's cheaper in the long run to build such a facility in the UK.
 

DarloRich

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A sudden collapse could cause a hiccup but there are a number of manufacturers in Europe who could fill the gap quickly.

are you sure? How quickly? Where form?

I wondered how long before someone brought Brexit into a straightforward question about how NR could be affected by the loss of a UK based supplier.

Because that is what has caused British Steel to fail and is what will result in uk taxpayers paying more money to buy rail from your European suppliers who can step in at the drop of hat and supply the type, volume and quality of rail to replace that lost at Scunthorpe.

Obviously, they could cut them up for melting into rail ;)

way to trivialise c.5000 people, several of who are members of my family, possibly losing their jobs. Thanks.

The trouble is that blast furnaces are chunky bits of kit. You can’t sell half of one.

and they are not things that can be turned on and off willy nilly. We went through all this at Redcar.
 

pdeaves

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way to trivialise c.5000 people, several of who are members of my family, possibly losing their jobs. Thanks.
Keep things in proportion. Whilst I understand concerns for family futures, etc., I don't think Maurice3000 was trivialising any human impacts whatsoever, just looking at a way an administrator could dispose of assets in an obviously lighthearted way. I mean, if you cut up a blast furnace to recycle the metal into rail, with what do you melt it?
 

DarloRich

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Keep things in proportion. Whilst I understand concerns for family futures, etc.

Fine. I am sorry if that came across as harsh. 800 jobs at risk on Teesside at Lackenby and Skiningrove in areas of already very low employment. Many more at Scunthorpe. I don't know Scunny well but expect the economic results of closure would be disastrous. God knows how many more in the supply chain. Lets also remember that for some of us this is very close to home.
 

hwl

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Fine. I am sorry if that came across as harsh. 800 jobs at risk on Teesside at Lackenby and Skiningrove in areas of already very low employment. Many more at Scunthorpe. I don't know Scunny well but expect the economic results of closure would be disastrous. God knows how many more in the supply chain. Lets also remember that for some of us this is very close to home.
About 20k in the supply chain.
 

Bletchleyite

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Fine. I am sorry if that came across as harsh. 800 jobs at risk on Teesside at Lackenby and Skiningrove in areas of already very low employment. Many more at Scunthorpe. I don't know Scunny well but expect the economic results of closure would be disastrous. God knows how many more in the supply chain. Lets also remember that for some of us this is very close to home.

It also risks further rise of the far-right parties. Nationalising it would at least make people hate the Tory Government less.
 

A0wen

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Fine. I am sorry if that came across as harsh. 800 jobs at risk on Teesside at Lackenby and Skiningrove in areas of already very low employment. Many more at Scunthorpe. I don't know Scunny well but expect the economic results of closure would be disastrous. God knows how many more in the supply chain. Lets also remember that for some of us this is very close to home.

Maybe so - but there is massive over-capacity in the global steel market, not just the European one and it's not just the UK which has seen plant closures:

https://www.telegraph.co.uk/finance...pe-as-Arcelor-Mittal-shuts-Spanish-plant.html

https://www.independent.co.uk/news/...dustry-is-in-crisis-and-why-the-a6701111.html

The problem is in part China which has (i) a huge capacity and (ii) is selling below cost. There's little justification for keeping unprofitable steel plants working in the UK, unless there's a clear way they can be made profitable. And in the remaining parts of British Steel that's highly unlikely. British Steel has been in decline for over 40 years, don't forget it was the Callaghan government which instigated the review of the then BSC that resulted in the closure of Corby and Consett steelworks - many try to blame Thatcher for those, but they are incorrect and in reality they would have closed regardless of who won the 1979 election.
 

Mag_seven

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When the Scottish steel industry was decimated we were told that market forces cannot stop at Hadrians Wall. Well in this case, market forces cannot stop at the Humber Estuary.
 

433N

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Whilst I understand the arguments in economics, it's seems bonkers that in a week when we have had highlighted the national security concerns surrounding Huawei as part of our infrastructure, we seem happy to import all our steel from China.

In the event of a war, are we going to be asking China for steel to build hardware ? Let's hope we are not at war with China or any of its friends, eh ?
 

A0wen

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Whilst I understand the arguments in economics, it's seems bonkers that in a week when we have had highlighted the national security concerns surrounding Huawei as part of our infrastructure, we seem happy to import all our steel from China.

In the event of a war, are we going to be asking China for steel to build hardware ? Let's hope we are not at war with China or any of its friends, eh ?

Because the next time there is a war, it's highly unlikely to be fought using "conventional" weapons.

A cyber-war is far more likely and that won't need steel. If it's not a cyber war then it will probably be nuclear. The days of sending men into battle armed with a machine gun are largely long gone.
 

LNW-GW Joint

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Network Rail says it has enough rail stockpiled that it does not expect to be affected if British Steel stops production.
There is huge oversupply of steel at the moment, partly because of the US-China trade war.
 

433N

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Because the next time there is a war, it's highly unlikely to be fought using "conventional" weapons.

A cyber-war is far more likely and that won't need steel. If it's not a cyber war then it will probably be nuclear. The days of sending men into battle armed with a machine gun are largely long gone.

Well, you're entitled to your opinion but I think you'll find that you are flying in the face of every bit of warfare since Nagasaki (including wars in Iraq and Afghanistan this millenium).
 

Clip

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Because that is what has caused British Steel to fail and is what will result in uk taxpayers paying more money to buy rail from your European suppliers who can step in at the drop of hat and supply the type, volume and quality of rail to replace that lost at Scunthorpe.

Lets be honest though - its obvious the company wasn't in good health before brexit which is why it was sold on for a nominal £1 to venture capitalists who have made some investment into the plant itself with something called the wire rod line. Full story here https://www.ft.com/content/f0db2cee-8a67-11e8-bf9e-8771d5404543

The resurrected British Steel has unveiled the biggest single investment in its manufacturing operations “for a decade”, after a technical problem at its production facilities weighed on profits last year. The company, which runs the large Scunthorpe steelworks in northern England, is to plough £50m into an upgrade of the site’s rod mill, which makes wire rod that goes into products from paper clips and screws to car springs. British Steel has been implementing a turnround plan since being formed two years ago, when the investment firm Greybull Capital paid £1 for Tata’s lossmaking European long products division and renamed it in homage to the former titan of UK industry. Earnings jumped 45 per cent to £68m before interest, tax, depreciation and amortisation in the 2018 financial year, while revenue increased 17 per cent to £1.4bn.

However, excluded from the ebitda figure was a one-off cost of £47m caused by a blast furnace chill, for which the company is pursuing an insurance claim. Even so, executive chairman Roland Junck said that a transformation was “firmly on track” and that without the incident, British Steel would have exceeded its “Year 2” target. During the first quarter of this year, ebitda hit £21m. “Increased raw material costs and fluctuating steel prices continue to be a challenge. It’s important safeguarding action is taken to prevent the dumping of cheap steel into Europe following the imposition of steel tariffs by the US,” Mr Junck added.

The apparent improvement in British Steel’s underlying financial performance will buoy hopes that the UK’s steel industry has turned a corner, after nearly collapsing in 2016 under the weight of plummeting prices for the metal and a wave of cheap imports into the EU. Britain’s largest steelmaker, Tata, is merging its wider European operations with those of ThyssenKrupp. In addition to its new wire rod line, which is scheduled to be commission in autumn 2019, British Steel said it had committed a further £40m to other capital expenditure this financial year. To help fund the investments, it has secured £90m of debt financing from White Oak Asset Finance, part of a US credit fund. Paul McBean, a trade union leader at Scunthorpe, said: “While we still have a long way to go, investments of this scale — and the ongoing commitment to capital expenditure — demonstrate the great optimism flowing through this company.” The company’s growth ambitions have been underlined by the expansion of its workforce, with 1,000 new employees recruited over the past two years, taking the workforce to 5,000. Workers are receiving a staggered 4 per cent pay rise, added the company, which also operates manufacturing sites in France and the Netherlands.


Greybull previously owned the failed UK airline Monarch.

2 things - if the company does go under what about their french and Dutch workforce too and also what about that insurance claim - has it been paid? If not why cant the govt give them the money in the hope that they will get the money back via that claim?

Tis a sad day yet again but theres many factors too this
 

option

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Some of the heritage railways had been buying new rail from BS.
So will they now buy from abroad, or will there be more competition for second-hand NR rail, which there may be less of because rail quality has been going up for a long time.
 
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