UK metals companies have threatened to take legal action against the government over tariffs on raw steel imports from Asia which they claim have caused a “tsunami” of problems for the industry.
Earlier this summer, the business secretary, Jonathan Reynolds, reduced the amount of raw steel from Vietnam and South Korea that can be imported tariff-free in a move designed to protect UK raw steel makers, which face competition from cheap imports.
In a letter to Reynolds, a group of manufacturers who use raw steel to make industrial products threatened to sue the government after the cut took effect in July, leaving shipments already paid for liable to a 25% tariff. Reynolds is expected to reply to the letter this week, after asking for more time to respond.
Manufacturers behind the legal letter said Reynolds gave just 24 hours’ notice of the quota cut, leaving thousands of tonnes of imported steel stranded at UK ports. They said steel already on ships from east Asia had been “bought and paid for” but would now attract a tariff on entry to the UK.
The Confederation of British Metalforming (CBM), which represent companies that forge, weld and roll raw steel to make industrial products, said its members faced a “tsunami” of problems, from higher costs to delayed shipments. It said disruptions in deliveries “are reverberating throughout domestic industry”.
Paul Whitehouse, the managing director of Steel & Alloy Gonvarri Industries, based near Birmingham, said he would need to pay more than £500,000 in tariff surcharges.
Whitehouse said: “The government has shot itself in the foot. It wants to help the steel industry, but acting in this way, giving just 24 hours’ notice, has only increased our expenses. We work on very small margins – 1% to 2% – and these extra costs matter.”
The main producers of raw steel in the UK are Tata Steel’s operations in south Wales and British Steel’s plant in Scunthorpe, which was taken over by the government in April after it became concerned that its Chinese owner, Jingye, was planning to let its blast furnaces cool.
Speciality Steel UK (SSUK), which employs 1,500 people and is part of the Liberty Steel Group owned by Sanjeev Gupta, is also under threat of closure.
UK steel businesses have struggled to find domestic buyers after a collapse in demand from longstanding customers. Car production has fallen in the UK and activity in the commercial construction sector, another large user of steel, has slowed this year.
A regime of quotas and tariffs already exists, protecting UK raw steel makers from cheap Chinese imports and restricting imports from the EU.
Pressure has mounted since February when many steel-producing countries began seeking new markets for their products amid threats by Donald Trump of hefty tariffs on imports to the US. Washington’s steel tariffs have also dented UK exports to the US.
The government said its decision followed a recommendation by the Trade Remedies Authority (TRA). However, the metal industry accused Reynolds of ignoring changes set out by the independent body.
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A review by the TRA recommended a cap of 40% on tariff-free imports from “other” countries that make raw steel, including Vietnam, Thailand and South Korea. But Reynolds reduced the cap to 15% and said it would apply the next day.
The industry had been expecting the new rules to be implemented in October, giving them time to find new suppliers.
The CBM president, Stephen Morley, said steel was being stockpiled at ports “creating a domino effect, with businesses facing additional costs, logistical challenges, and uncertainties about the future of their operations”.
He said his members were in favour of measures safeguarding UK steel production, but added that Reynolds had “exacerbated the existing pressures on firms already grappling with the aftermath of the current economic climate”.
Members of the CBM are understood to be clubbing together to fund a judicial review of Reynolds’s decision after sending him a pre-action protocol letter.
A spokesperson for the Department for Business and Trade said: “We do not comment on potential or ongoing legal proceedings.”
