Solving Europes steel crisis is an issue for India

Liberty Steel CEO Sanjeev Gupta writes for 'India Global Business' on the ongoing crisis in the steel industry across Europe and why he is certain it would have been on the agenda for Prime Ministers Narendra Modi and David Cameron when they met in the UK recently.With so much Indian investment and interest in Britain's steel industry, it would be surprising if the current plight of the struggling sector did not feature somewhere on the agenda when Prime Minister Modi met UK ministers during his visit in November.The scale of Indian involvement in UK steel over the past three decades has been truly breathtaking, but equally breathtaking has been the acceleration in the decline of the industry over recent years.In fact one might conclude from reading the headlines over the last few months that the days of steel production in Britain are numbered. With plants being closed or mothballed across the country, there appears to be a deepening sense of crisis.More alarmingly, many commentators and policy-makers adopt a fatalistic stance and give the impression that very little can be done to help the industry in the face of global forces. Since the 1980s Britain has developed a natural aversion to interfering in the private sector, and anything that smacked of protectionism has been strictly off limits. While I have no problem with that in principle, I believe that, in the case of steel, Britain seems to make a special effort to put itself at a competitive disadvantage against EU and other overseas producers.And in a cyclical market, the country consequently risks losing massive steel production capacity during the downturn that it will need when the inevitable upturn comes.The recovery of domestic and international demand will certainly come, it's only a question of time. Steel is a product that is consumed within an economy and therefore continually needs to be replaced, albeit at varying rates, depending on where we are in the cycle. My own belief is that we have reached the bottom of current cycle and the comeback will come soon.I'm sufficiently convinced of this that our own company, Liberty Steel, decided to re-open a mothballed rolling mill in South Wales last month and re-engaged the 150-strong workforce who had been laid off on half pay for nearly two years.We retained and protected the workforce because they possessed valuable skills and experience we knew we would need. We couldn't afford to lose that asset if we wanted to restart the plant.Likewise the UK industry as a whole can't afford to lose its assets through plant closures and skill loss, ultimately finding itself without the capacity to respond when demand does begin to pick up.Without straying anywhere near the realms of state aid, the UK Government can do a huge amount to avoid that scenario by bolstering the competitiveness of the industry and helping it fight against current market challenges.Reducing green levies on energy and granting relief on business rates during the current difficulties would help preserve steel production capacity within the UK manufacturing eco-system.UK Government could also help the energy sector by reinstating its full support for renewable energy such as bio-mass and tidal generation, both of which are sources of cost-effective long term power. Britain has the opportunity to be a world leader in the renewable power revolution becoming the centre of excellence for initiatives like Tidal Lagoon that offer a more competitive and safer alternative to Nuclear power at the same scale, not only for the UK but also for countries like India which has similar tidal ranges to the UK.I'm convinced steel production, including liquid steel making, can be viable in the UK. We have sufficient actual and potential demand domestically to underpin the sector.We need equality in terms of our ability to compete with international rivals.Our own company has begun rolling coil from steel slab that we currently source from Russia and Brazil at advantageous rates that make our prices attractive to British consumers. But make no mistake, we would rather be melting scrap steel and making our own slabs as well, because that's more sustainable, gives us more flexibility and provides employment for many more steelworkers. Our plant already has the arc furnaces needed for this process, so capital investment isn't a barrier. We, in common with other producers, simply need a regime that allows us to compete fairly.The reason we don't melt steel currently is mainly due to UK power prices. Energy costs are by far the most significant element in the melting of scrap, and UK energy prices are well above those of competitor countries.The punitive carbon tax imposed on energy in the UK is actually achieving the reverse of its stated aim. Right now the UK exports large volumes of scrap to be converted to steel in other countries - for example Turkey - and steel produced from this is imported back to the UK. While the emissions may occur in another country, thereby helping Britain meet its green targets, the overall impact on the planet is negative due to the extra transport involved.Of course we support international efforts to reduce carbon emissions, and have even purchased a coalfired power station next to our steel plant in Newport with the intention of converting it to biomass, while also pursuing other significant renewable initiatives such as Tidal Lagoon.Admittedly the makers of primary steel, as opposed to recycled steel, do face some structural challenges in the UK - mainly due to historic cost base and rigidity - but these problems are made worse by artificially high energy prices.A strong Indian-owned steel sector in the UK is also good news for India as it protects and promotes Indian investments in the UK, and, with steel demand in India poised to grow dramatically, it holds out the prospect of investment and job creation in the Indian steel sector from UK investment further down the line.So while there will no doubt be many matters on Mr Modi's agenda when he met UK government representatives, I sincerely hope he would have found the opportunity to make the case for steel.Sanjeev Gupta is Group Managing Director of Liberty House and CEO of Liberty Steel Newport.