Steel Industry may face meltdown

The excellent Big Question feature in the Independent today turns its attention to the problems of what remains of the UK steel industry

“Demand is collapsing as the global recession takes the wind out of both the motor and construction industries. The credit crunch and ensuing recession are wreaking havoc in the motor and building industries in both the UK and Europe, which are Corus’s main markets.”

Corus has announced a huge number of redundancies and the steelworkers unions are complaining that competitiveness of the UK steel sector is being undermined by subsidies to manufacturers in other countries such as France. Further background is available here from the Times: Steelworkers demand same government subsidies as European rivals

“Facing a precipitous fall in demand for steel from the motor and building industries, Corus said that it needed help to subsidise short-time working at mills that are operating below capacity. Demand in Europe had fallen by 40 per cent while the Corus order book was down 30 per cent.”

Jim has blogged about the rise in labour productivity at UK steel plants - but will increasing efficiency be enough to prevent widespread plant shut downs and job losses? Corus will have a tough time riding out this storm.

AS students might consider these questions:

What are the main demand-side problems facing UK steel producers? What are the main supply-side problems facing the UK steel industry? Explain how an economic recession affects the market price of steel Is there a case for the UK government to offer financial support to the industry at this time?