The inevitable has happened and steelmaker SSI UK based in the North East of England has announced that it is to pause iron and steelmaking operations at its Redcar site. This follows more than a week of UK media speculation around the future of the slab-making plant owned and operated by Thailand’s Sahaviriya Steel Industries. 2000 direct jobs are now at risk.

In a statement sent to Kallanish, SSI UK says that iron and steelmaking operations at its plant at Teesside will be paused due to ongoing issues with the supply of raw materials and services. “Preparations are being made to systematically reduce the production during the course of today [… Friday], with a view to retaining the plant in a condition whereby it can be brought back into production at an appropriate point,” the steelmaker says.

Redcar coke ovens and the power station will continue to operate at a reduced level. Production at South Bank coke ovens will cease and the plant mothballed, the statement continues.

The parlous state in which the UK steel production sector find itself is nothing new. UK steelmakers for years have been fighting a losing battle against government indifference, financial sector ambivalence and a shrinking domestic market for their products. Under successive UK governments since 1979, making (or manufacturing) things has become unfashionable. And the less widgets you make, the less steel you need. Prime minister David Cameron has not shown any outward signs of wanting to change this.

Offshore ownership has kept the UK steel production sector afloat for the last 10 years. So what do foreign companies see in the sector that UK investors patently cannot? They see a skilled and committed workforce making a sophisticated range of quality products which are still demanded worldwide. Parent company SSI plc has invested heavily in the Teesside plant, SSI UK chief executive Cornelius Louwens says.

Many commentators however are missing an important point. Most of the slabs that Redcar produces go offshore to the parent company’s Asian plants. SSI in Thailand has had a difficult year so far with its domestic steel market under extreme pressure from low-priced Chinese imports. The company lost money in the first half of the year and external slab sales for example were down by 30%, it said in its second quarter results briefing.

This however is where the UK government can still help. Redcar needs to reduce costs to keep slab production commercially viable. The chancellor of the exchequer George Osborne cannot influence raw material input prices, nor selling-out prices for steel. Neither can he help the sector with direct financial aid according to EU rules, or so we are often told.

He can be of use however, if he really wants to be, by creating a much fairer tax regime for heavy industrial energy users such as SSI. Tax policy influences energy prices and business rates, as well as corporation tax and a raft of other specialist taxes only accountants dream about. It won’t solve the problem but it could give breathing space to the Redcar plant until markets rebound.

The Redcar blast furnace is the second largest in Western Europe. The largest is run by Italian steelmaker Ilva at its Taranto plant. The Ilva furnace has been under threat of closure for at least a year, primarily for environmental reasons The Italian government has been turning cartwheels to keep the furnace and the plant operational (see Kallanish passim).

Come on Messrs Cameron and Osborne, turn a few cartwheels. There are at least 2000 good reasons for so doing, Kallanish observes.