LONDON—Manufacturer Tata Steel announced 1,200 job cuts in the U.K., underscoring the damage caused by cheap Chinese imports and throwing a shroud over a state visit by Chinese President Xi Jinping designed to usher in a “golden era” of relations between the countries.
Tata blamed the layoffs in northern England and Scotland on a “flood of cheap imports, particularly from China,” along with high electricity costs and the strong pound.
Though the cuts had been rumoured for days, the timing of the announcement—on the first full day of Xi’s visit—seemed designed to win maximum attention.
“The U.K. steel industry is struggling for survival in the face of extremely challenging market conditions,” Karl Koehler, chief executive of Tata’s European operations, said in a statement. “This industry has a crucial role to play in rebalancing the U.K. economy, but we need a fairer system to encourage growth.”
The British government is under pressure to raise the issue of China selling steel at a loss on world markets. Tata’s decision comes only weeks after Sahaviriya Steel Industries announced the closure of its plant in Redcar, costing 2,200 jobs. Another firm, Caparo Industries, also went into partial administration, threatening hundreds more jobs.
China’s steel exports are “certainly one of the things we’ll be talking about,” Foreign Secretary Philip Hammond told the BBC, while stressing that increased Chinese investment will stimulate the British economy and create jobs.
The oversupply of steel on the world market has led to lower prices, and the European Union is trying to ensure that Chinese steel is fairly priced by imposing anti-dumping duties, Hammond said.
But Koehler called on the European Commission, the EU’s governing body, to do “much, much more to deal with unfairly traded imports.”
“Inaction threatens the future of the entire European steel industry,” he said.
China will not be surprised by a government raising concerns about a national industry, said Damian Tobin, a lecturer in Chinese Business and Management at SOAS University of London. But the timing of the announcement will pressure Britain to add the steel issue to discussions on trade, nuclear power and high speed rail.
“China is willing to talk about these things,” Tobin said. “(The question) is whether the U.K government is prepared to bring up these issues when they would rather talk about business. Being pragmatic suits the Chinese side very well.”
Tata, whose European operations include plants in the U.K., the Netherlands, Germany, France and Belgium, said that in the past two years, imports of steel plate from China have quadrupled.
A stronger pound has also undermined the competitiveness of British exports, and high electricity costs have eaten into profits.
Tata Steel, part of a corporation based in India, previously said it planned to cut costs and focus on higher-valued products. Oversupply is greatest among lower-value products.