The UK’s Steel industry requires urgent support to keep running the vital sector amid the novel coronavirus emergency. The steel industry is the backbone of the UK as it supports other sectors as well, such as defence, construction and the automotive sector and the recovery of this sector becomes vital if all these sectors have to recover from the crisis of coronavirus. The present situation of the industry is such that it urgently needs government assistance, and it is equally necessary for the UK government that it should act proactively to bring the steel industry into regular operation and help it by removing the current cap on the available loans.
Meanwhile, many of the steel industry players are looking for government support so that they can run their business normally after being hit by the coronavirus epidemic. In the latest, Welsh Labour MP Stephen Kinnock revealed that the UK’s major steel manufacturer, TATA Steel Limited has asked for around £500 million of government support to weather the situation of coronavirus crisis. The company has already started the discussion with the Welsh as well as the British government for a bailout after it was revealed that its biggest clients stopped production in Europe and the UK.
The British government has already introduced a COVID-19 large business interruption loan programme, which provides a loan of up to £50 million for those businesses who have gross revenue of more than £45 million. But it is just one-tenth of the amount which TATA steel is asking for. The steel company had already been in troubles and had been affected due to financial crunch and was forced to shut down its Newport plant in the year 2019.
In a positive for the company, Stephen Kinnock has reportedly supported the company and said that the British government should increase the limit on this kind of scheme to more than £50 million. It was also stated that Tata steel has projected that it will take around six months to reach the level of normal operations and may be facing various instances of the cash crunch for the coming six months.
However, the government representative has stated that the nation has already put its best foot forward to provide the best possible package for the businesses, who are facing a critical financial situation amid COVID-19 pandemic. Tata Steel company plays a huge role in the steel industry of the United Kingdom, employing more than 8K workers throughout the UK, which consist of over 4K workers at the Port Talbot steelworks in South Wales alone. It is being said that, while providing the best possible scheme, the UK government will not only be supporting the steel industry, but it will safeguard the looming job crisis in Britain as well.
Overview of TATA Steel Limited
Tata Steel Limited (LON: TTST) is one of the prominent global steel manufacturers. It operates in twenty-six countries, including the UK and has commercial offices in more than thirty-five countries. The company is one of the most important steel manufactures in Europe. The company’s products support the engineering, packaging, automotive, construction and infrastructure sectors all across the globe. TATA Steel Ltd. works on five strategic aspects, which includes innovation, operational excellence, client focus, people and responsibility.
TTST - Share Price Performance
(Source: Thomson Reuters)
On 27th April 2020, at the market close, the stock (GDR) of Tata Steel Limited increased by 2.00 per cent or 0.07 points and closed at USD 3.57 as compared to prior day closing price. In the last 365 days, the company achieved the highest price of USD 8.06 on 26th April 2019, whereas the company’s share posted the one-year lowest price of USD 3.10 in the last month, i.e. on 24th March 2020. As the graph shows, the stock has been very volatile in the last one month.
Impact of Novel coronavirus on the global steel industry
The situation of the British steel industry is no different than the other industries of the nation because many of its companies have stopped their operations due to complete lockdown and novel coronavirus effects. However, in the month of March 2020, the industry got some positive news after the Jingye group, a Chinese group, completed the acquisition of British Steel. This development saved around 3,000 jobs of British industry, which were in danger with the fear of the collapse of British Steel. As per the reports from the company, the low-level demand for steel had brought the production crisis, and it was also reported that the demand for steel decreased to nearly 40 per cent, which had pushed the UK steel industry to a liquidity crunch. The First Secretary Dominic Raab of the UK government had recently stated that Chancellor is prudently looking at the concerns of the steel sector. He added that companies who are not able to get any help from previously announced schemes; the government would look for providing different other avenues targeted to help all the diverse and essential segments of the economy.
Let’s have a look at the coronavirus impact on the steel industry of other countries:
- The novel coronaviruscrisis has also impacted the US steel industry. Till March-end, the US steel production decreased to 12.7 per cent on year on year basis.
- Due to the novel coronavirus epidemic, the Indian steel demand is anticipated to decrease by 7.7 per cent in the year 2020. As per the data of steel Ministry in India, the crude steel production dropped to 23 per cent month on month to 7.39 million mt in March 2020, whereas the finished steel output decreased by 19 per cent to 6.75 million mt.
- Japan’s industry ministry has projected that the demand for steel for automobiles sector will reduce by 8 per cent from April to June 2020, as compared to prior year same period. Also, the export is likely to decrease by 21 per cent amid the novel coronavirus crisis.
- Steel production of European Union has already been slashed by around 50 per cent due to novel coronavirus impact, and now it is expected to fall further as the booking of the new order are now also down by around 75 per cent.
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