The UK government is reportedly about to proceed with the nationalization of British Steel, which is in a situation very similar to that of Acciaierie d’Italia: both companies are under extraordinary administration and both are the only ones in their respective countries equipped with blast furnaces for the production of “primary” steel.
WHAT THE BRITISH GOVERNMENT WILL DO WITH BRITISH STEEL
According to sources from the Financial Times, the British government will soon proceed with the full nationalization of British Steel after having used special powers a year ago to take control and thus prevent the closure of the blast furnaces by the Chinese group Jingye, which acquired it in 2020.
The profitable management of the Scunthorpe blast furnaces has proven complicated in the past. In 2016, British Steel was sold by the Indian group Tata Steel to the private equity fund Greybull Capital, which purchased it for the price of 1 pound. Only a few years later – in 2019 – the company went bankrupt, then passing into the hands of Jingye.
The public intervention avoided the dismissal of 3,500 workers, but British Steel is operating at a loss and the British government is spending hundreds of millions of pounds to keep it running: more precisely, 377 million just between April and last January; by June, the expenditure could reach 615 million. The case of Acciaierie d’Italia, which loses about one million euros per day and depends on government loans, is very similar.
THE SITUATION WITH JINGYE
The British government cannot sell British Steel, neither in part nor in whole, nor can it make decisions about its industrial strategy because the company is still under the economic control of Jingye. The Chinese group rejected the 100 million pound offer presented last month by London, demanding compensation of over 1 billion.
To unlock the situation, the British government recently classified British Steel as a “national strategic asset”: in this way, it could resort to national security legislation to impose the nationalization of the company.
THE TRANSITION OF BRITISH STEEL
As mentioned, the British Steel plant in Scunthorpe hosts the last two active blast furnaces in the United Kingdom, highly significant because they produce primary steel, a variety obtained from iron ore that is qualitatively different from “secondary” steel, made from scrap. The Scunthorpe site produces 95 percent of the steel used in the UK railway network.
However, the government would like to encourage the electrification of British Steel’s processes to reduce emissions – the Italian government has also prepared, for the former Ilva, a transition from blast furnaces to electric furnaces – but the transition would cause the loss of thousands of jobs.
MICHAEL FLACKS’ PLAN
The English entrepreneur Michael Flacks, known for making a fortune by rescuing struggling companies and in negotiations to purchase Acciaierie d’Italia, has said he is interested in buying British Steel to merge it with the former Ilva and create a large European steel conglomerate.
THE SITUATION OF ACCIAIERIE D’ITALIA
At the end of December, the commissioners of Acciaierie d’Italia initiated an exclusive negotiation with Michael Flacks’ fund – Flacks Group, based in the United States – for the sale of the company. The fund offered only 1 euro to acquire the former Ilva plants, but promised an investment of 5 billion: the revival plan foresees doubling steel production to four million tons per year and increasing the number of employees to 8,500 units.
As reported by Energia Oltre, however, there is tension between Flacks Group and the Italian government. The fund, in fact, “has defined some requests from the extraordinary commissioners as ‘unacceptable,’ calling for stronger public support — a vendor loan — to restart the plants.” Of the five blast furnaces at the Taranto site, only one is currently operational – blast furnace 4 – but blast furnace 2 should also resume activity in the coming months. Blast furnace 1, however, shut down last May due to a fire, remains under seizure by decision of the Taranto prosecutor’s office.
Flacks Group’s plan foresees government participation in the share capital of Acciaierie d’Italia with a 40 percent stake, which the fund could eventually purchase in the future at a price of 500 million to 1 billion.
