British Steel is expected to suffer increased losses due to the rising energy and raw materials prices following Russia’s invasion in Ukraine.
In its delayed 2021 accounts, published just last week, Britain’s second largest steelmaker warned that the war in Eastern Europe had caused a period of significant volatility, both in terms of absolute prices and costs, as well as the level of margins for steel, which contributed to “significant losses” by the company in 2022.
Financial statements for the period ending December 2022, which were supposed to be submitted by September of last year are still unfiled.
Moore Kingston Smith’s resignation as its auditor has thrown the financial health of the Chinese owned company into doubt after it was unable verify stock worth tens and millions of pounds. Mazars had previously warned that the steelmaker may not be in a position to continue as a running concern if it runs out of cash.
British Steel Limited’s latest accounts show that the company lost £49.5m in the year ending December 2021. This is down from the profit of £267.8m the previous year, despite revenues growing from £844m to £1.5bn during this period.
The auditors stated that if British Steel continued to lose money, they would require more funding from Jingye , which saved British Steel after the talks between the Government and private equity owners of British Steel broke down in March 2020.
The directors said that they were “confident’ that British Steel will have enough funding to last at least 12 month, but auditors stated the lack of “legally-binding” agreements for more cash made the prospects uncertain. Jingye had invested £100 million in equity funding eight days prior to the disclosure.
The Scunthorpe miner stated that “the company has ongoing formal funding discussions with the government about financial assistance for energy costs and projects to decarbonise”. The government is believed to have offered Jingye £300 million in order to help pay for the switch from coal-fired furnaces to energy costs and to help pay for the transition. It is believed that Jingye has refused to accept the money, and instead asked for more.
Community, the steelworkers’ union, will be meeting the government to demand more financial assistance for British steel companies this week.
Paul McBean of the Community Union, and the multi-union chair at British Steel said that £300m was “a drop in the ocean” as the cost for Scunthorpe alone to become carbon-neutral would be around £3billion. Jingye’s not being unreasonable, as whatever funding is provided by the government, Jingye will match it.”
Some sources suggested that the government might be hesitant to give more taxpayers money to a Chinese firm, while others said that British Steel’s failure to file its accounts was a sticking issue.
British Steel runs two of the remaining four blast furnaces that produce steel in Britain using raw materials. Tata Steel operates the two.
British Steel employs about 4,000 people, of which 3,000 are employed at the Scunthorpe blast furnaces built in 19th century. Tata confirmed last week that it would be closing its blast furnaces in order to create green steelmaking facilities, which will cost 2,800 jobs.
A government spokesperson said: “While it is not possible to comment on sensitive commercial matters, we are committed to the UK Steel Sector as demonstrated by our unprecedented package of assistance for the Port Talbot . Our commitment to the UK steel sector is clear from our unprecedented package of support for the Port Talbot Steelworks.
We have provided British Steel with a generous package of support, including over PS300 million in investment to help British Steel cut emissions, protect jobs, and unlock more than £1 billion from stakeholder investments.
British Steel was contacted for a comment.