The British steel industry is currently at a crossroads, facing a potential crisis that could shape its future for years to come. With existing trade protections set to expire in 2026, UK steelmakers are calling for stronger defensive measures against an expected surge of imported steel. This call for action is driven by significant global overcapacity, estimated at 543 million tons in 2023, which is vastly larger than the UK’s market can absorb. This surplus is largely due to state-backed expansions in Southeast Asia and the Middle East, where production capacity is increasingly outstripping local demand. Meanwhile, China’s ramp-up of steel exports—spurred by dwindling domestic demand—is adding further downward pressure on global prices, making the need for protective measures even more urgent for the UK.
Global Overcapacity and Its Implications
One of the primary reasons for the UK’s steel industry’s current predicament is the immense overproduction of steel on a global scale. The overcapacity issue is exacerbated by government-funded expansions, especially in countries like those in Southeast Asia and the Middle East. These regions are producing far more steel than they need domestically, resulting in an excess that is flooding the global market. The UK, with a relatively small steel market, finds itself particularly vulnerable to this influx. Current safeguards were initially put in place in response to the Trump administration’s Section 232 tariffs in 2018, designed to protect domestic industries by curbing the volume of cheaper imports. However, under World Trade Organization rules, these safeguard measures cannot be extended beyond 2026, leaving the UK’s steel industry potentially exposed.
UK Steel, the industry association, highlights the severity of the situation, pointing to the rising import share, which reached 68% in 2024, up from 60% in 2023 and 55% in 2022. This trend signifies that the influx of imported steel is already making it increasingly difficult for domestic producers to compete. UK Steel advocates for renewed and even enhanced protective measures similar to those being beefed up in the European Union and other countries. Without such measures, they argue, the UK risks becoming a dumping ground for surplus steel, jeopardizing the market share and profitability of its own steelmakers. The stakes are high, not just in terms of competitiveness but also for the future sustainability of the industry, particularly the significant investments required for decarbonization.
Rising Protectionism and Trade Diversion
As countries around the world adopt more protectionist measures to guard their steel industries against the deluge of cheap imports, the landscape becomes increasingly competitive and fraught with challenges. In June 2024, the UK extended its safeguard measures on 15 steel categories for another two years, setting the new expiration date in June 2026. These categories encompass a range of products such as hot-rolled and cold-rolled plates, metal and organic coated plates, rebar, wire rod, bars, angles, shapes, and welded pipes. This move underscores the industry’s urgent plea for continued protection, even as other nations fortify their own defenses against global overcapacity.
The overarching trend of rising protectionism is a response to the aggressive export strategies of countries with excess production, like China. As more nations close their markets to these cheaper exports, the UK could face increased trade diversion, making its market an attractive alternative for exporters looking to offload their surplus. UK Steel warns that without robust trade policies and continued safeguards, the domestic industry could be overwhelmed. The organization stresses that losing market share isn’t the only risk; a weakened domestic industry would also undermine investments in green technologies aimed at reducing carbon emissions.
Future Risks and the Need for Government Action
The rise in protectionism is a reaction to the aggressive export strategies of countries with excess production, like China. With more nations shutting their markets to these cheaper exports, the UK could see increased trade diversion. This makes its market a tempting option for exporters looking to dump their surplus. UK Steel warns that without strong trade policies and continuous safeguards, the domestic industry could be inundated. Besides losing market share, a weakening domestic industry would also diminish investments in green technologies aimed at cutting carbon emissions.
