Row brews over steel industry cuts

FURTHER job cuts and restructuring in the British steel industry look inevitable as part of a bid by the European Commission to attack overcapacity. However, a row is developing among European steel producers over where the biggest cuts should fall.

Several independent UK steel companies are considering closing or merging facilities, according to sources in Brussels. British Steel, whose savage cost-cutting has made it one of Europe's most efficient steel firms, has not ruled out more job losses although it is reluctant to accept any further reductions in capacity.

EC industry ministers last week approved a plan which could mean an estimated 50,000 job losses Europe-wide. The Commission wants to reduce crude steel output by 30 million tonnes, and finished products by 20 million tonnes. Brussels will provide massive subsidies to help with the restructuring but its plans have still to win the approval of the European steel industry.

Steel producers in Britain are believed to have told EC officials that there could be scope for further rationalisation in the UK. 'Everyone wants cuts in production but there is much resistance in Europe as to who is to make them,' said an insider.

German steel producers are under pressure to make further cuts, but they point at state-owned steel firms in Italy and Spain, saying subsidies paid out over the years have distorted the market.

This weekend British Steel said Spain and Italy should shoulder the heaviest losses because their industries were the most inefficient. But a spokesman said: 'We are all dependent on a solution to the overcapacity problem. Even efficient companies like us may have to retract further.' But he stressed that BS felt it had already cut enough capacity.

The UK's independent steel companiesare said to be prepared to slim down further to help push through the EC deal, and could combine facilities to help cut costs.

This week the Commission's special steel envoy, Fernand Braun, embarks on a tour of producers to try to win agreement.

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