Executives from China’s largest privately-owned rebar producer, Jingye Group, met with British government officials to discuss financial aid to secure the takeover of insolvent British Steel last week.
The financial package referred to as the Regional Growth Fund (RGF), worth approximately £120mn, was reported to be the main item on the agenda among other items including indemnities, grants, loans, potential EU carbon credits, and subsidies.
Jingye Group, headquartered in north China’s Hebei provincial capital Shijiazhuang, operates with an annual steel-making capacity of 12mn mt; producing mainly deformed and round bar as well as hot rolled coil, medium, and heavy plate steel.
While Jingye’s long steel product portfolio is aligned to that of British Steel’s, a previous ill-fated acquisition by Sahaviriya Steel Industries of the Teeside Steelworks has partly proven that importing steel raw materials and exporting finished steel from the UK is not a sustainable business model.
A deal of this size and international profile would require financing from some of China’s state banks, while details on the eligibility of Jingye to circumnavigate the country’s capital controls remains to be seen.
If Jingye succeeds in acquiring British Steel, the transaction would mark the second known steel investment by a Chinese steel producer in Europe with the first one being Hebei Iron & Steel’s purchase of Serbian steel mill Železara Smederevo Steelworks.
The Scunthorpe-based steelmaker, owned by Greybull Capital prior to entering administration, produced 2.8mn mt of steel in 2018 and has an annual steel-making capacity of 4.5mn mt; producing construction steel, rail, wire rod, and special profiles.