Chinese Giant Jingye Group likely to mark its Entry in UK with British Steel's Acquisition

China's Jingye Group said on Monday that it is in talks to buy British Steel in a deal estimated to be worth about 70 million pounds (USD 90 million) that could help protect thousands of British jobs and ease uncertainty over the troubled steelmaker. The company is also indirectly responsible for 20,000 workers in the supply chain and produces around 2.5 MnT of steel a year.

British Steel was put into compulsory liquidation on 22 May 2019 after Greybull Capital, which bought the firm for one pound from Tata Steel three years ago, failed to secure funding to continue its operations. The Jingye Group has promised that it can access up to Euro 300 million in loans, indemnities and grants to back its plan to boost production at the plant by 10%.

The news has come after talks stalled between the steelmaker and Ataer, which is a subsidiary of Turkey's state military retirement scheme Oyak. The Turkish firm is said to have fallen to third place in the bidding, also behind steel baron Sanjeev Gupta, who owns the UK-based Liberty House group.

It is expected that an agreement will be signed, but that the company will continue to be run by the Official Receiver for at least a month before being transferred.

Who is Jingye Group?

Jingye has 23,500 employees and as well as its main steel and iron making businesses, but also engages in tourism, hotels and real estate. It has total registered assets of 39 billion yuan (Euros 4.4 billion). According to its website, Jingye Group ranked 217th among the top 500 enterprises in China in 2019. The firm sells its products nationwide and exports them to more than 80 countries and regions. Jingye's products have been used in major projects such as Beijing Daxing International Airport and the underground system in Shijiazhuang.

Jingye Group is interested in the products that British Steel makes that it does not. British Steel is a specialist in railway tracks, long products, a catch-all term for girders used in construction, and the high-quality steel wire used in car tyres and dozens of other industrial applications. Jingye does not appear to make the first two, so the purchase of British Steel should bring it some valuable technology and new product lines.

Jingye and British Steel both make wire rods, but there is one crucial difference. British Steel makes rail, high-quality rail and heavy sections, ie girders, which Jingye doesn't make. So it will not only increases the amount of different products that Jingye could make but also, much more importantly, secures a foothold in the UK.

The UK industry has been struggling for a number of years amid claims that China has been flooding the market with cheap steel. In 2016 the EU imposed tariffs of up to 73.7% on Chinese steel after an influx of cheap imports from Asia forced European manufacturers to cut jobs and lower prices.