British Steel – Turkish Pension Fund Emerges as Buying Frontrunner, but Why?

Following liquidation this May of British Steel, UK Business Secretary Greg Clark said - "In the days and weeks ahead, I will be working with the Official Receiver and a British Steel support group of management, trade unions, companies in the supply chain and local communities, to pursue remorselessly every possible step to secure the future of the valuable operations in sites at Scunthorpe, Skinningrove and on Teesside."

We discussed what might happen next for British Steel, and on Monday learnt that a subsidiary of Turkish pension fund firm Oyak (Ataer Holding) is nominated the preferred buyer to acquire the manufacturing organisation and its subsidiaries.

While the director general at trade body UK Steel feels this is “… enormously positive news for British Steel,” others, reported by The Guardian, point to Oyak’s intended removal of its chemicals factory from Tyneside to Austria and Turkey with associated job losses, and the firm’s scrutiny by the UK’s largest trade union, Unite, into the firm’s labour and human rights records.

Meanwhile, our expert metals market sister site, Metal Miner, has been tracking the progress of a potential sale in the hope that British Steel would sell to the UK’s largest steel producer, Liberty House, which already owns several other steel assets in the UK and mainland Europe. “While Liberty House appeared to be the frontrunner, it seems to have been sidelined in favor of a more controversial bidder: Turkish pension fund Oyak,” stated analyst Stuart Burns.

He goes on to explain to what extent they see the buyer as a ‘controversial’ bidder, with its ties to the Turkish military’s $15 billion pension fund, and postulates that British Steel could become another of its firms facing a “hollowing out of jobs as the new owners drive for profits.”

It does own, however, that with British Steel in great need of investment, Oyak could have been preferred because the amount of potential job losses appear to represent a much smaller number than if Liberty were to close one of the blast furnaces, as it stated, and use metal from another of its steel mill. Oyak’s plan is rather to raise production levels up to what is considered more competitive in the European marketplace.

But, that comes with a caveat. In a plan to move from coal to gas-powered blast furnaces and eventually to a near-zero carbon footprint, the firm will be approaching the British government for funding, possibly to the tune of £300m – a third of what it intends to invest.

Given that Oyak already owns 49.3% of Turkey’s largest steelmaker, Erdemir, as well as a range of mining and manufacturing assets, Metal Miner wonders why the firm is planning this move in the UK and not in its domestic market. Read the full post here to find out more about that.

Clearly there are still questions to be raised, and answered. The UK shadow business secretary, said: “It is essential that Oyak submits its full plans for proper scrutiny by the steel unions and works closely with them to ensure the long-term future of British steel in the interests of the workers, not just shareholders.’’

And our Spend Matters Europe GM, Jenny Draper commented: “As well as the huge consideration of job security for the workforce of British Steel, the impact to the supply chain should be a significant factor also in the sale of the business. A concern would definitely be that Oyak may turn to lower-cost alternatives in Eastern Europe, rather than working with UK-based suppliers. It would be reassuring to think that agreements being negotiated include undertakings to commit to local supply chains, as well as local employee retention.”

 

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