British Steel’s Chinese buyer is struggling to agree new contracts with suppliers, according to people with knowledge of the situation.
A rescue deal for the collapsed steelmaker was struck last month with Jingye Group paying about £50m and saving 4,000 jobs, mostly at British Steel’s Scunthorpe plant in northern England.
Executives from the Chinese conglomerate have been meeting major suppliers including Associated British Ports, BOC and Tarmac to secure new contract terms but have hit “a brick wall”, said one person familiar with the situation.
“It has not yet been possible to secure new terms with major suppliers,” the person said. “The companies are being pretty inflexible . . . [BOC] have been making so much money out of those contracts.”
BOC, which is owned by Linde of Germany, supplies industrial gases to British Steel while Tarmac has a deal to buy slag waste from the smelting process.
Two areas of discussion are payment terms and contract prices. British Steel’s suppliers were on 90-day payment terms before it fell into insolvency in May. They subsequently demanded shorter times to reduce the risk of dealing with the company, said another person with knowledge of the discussions, who added that suppliers were keen to stick to these terms.
Talks have become bogged down with ABP, which handles imports of raw materials such as iron ore and coke, and exports finished steel through Immingham on the Humber. Executives from Jingye met ABP in London last week.
“Negotiations are going on but they are currently frustrated over detail. We want the deal to work and are trying to be co-operative,” said one person involved in the process.
About 140 jobs at ABP, which took over the terminal from British Steel in 2018, depend on the steelmaker.
One supplier said Jingye had changed its demands. They said the Chinese group has struggled to understand British politics and the importance of winning government support prior to the general election, when the Conservative party was trying to win votes in areas where British Steel is a big employer.
Questions have been raised about the purchase of some of the UK’s biggest steelworks by a Chinese company, given past cases of Chinese steelmakers dumping underpriced products into the EU.
British Steel’s factory in France has been put up for sale as a contingency measure in case the Jingye deal falls through.
Andrea Leadsom, business secretary, recently met officials from Jingye, including chairman Li Ganpo, to discuss the takeover. “It was a highly productive meeting and I remain optimistic about progress!” she said in a tweet.
The major suppliers previously refused to agree price cuts in discussions with Turkey’s Ataer Holdings, which failed to seal a takeover deal this year.
“Jingye group and the relevant authorities continue to make progress in securing the necessary approvals to complete the transaction and remain confident that these will be achieved in the new year,” the company said.
ABP, BOC and Tarmac declined to comment.
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December 30, 2019 at 06:00AM
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