Steel and metals group Liberty House certainly has an unusual timing. As delegates gathered for a crisis summit on the British steel industry on Friday in the northern city of Rotherham — at which unions, and industry are urging the government to take urgent action to support the industry — the group resumed production at a mothballed steel plant that it bought in 2013, with 150 employees that it has retained over this period.

The group will begin producing 50,000 mt of hot rolled coil a month for the UK domestic market, but expects to double this over time. Managing Director Sanjeev Gupta, who founded the company while he was a student at Cambridge University in 1992, spoke to Business Line about why he’s confident that the group can successfully ride out the crisis facing the British steel industry — despite issues including electricity prices being considerably higher than the rest of Europe, a strong pound, and dumping of produce from countries such as China that have forced the closure of one large facility, the mothballing of several, and the withdrawal of the Klesch Group from acquiring Tata Steel’s long products division.

Why did you make this acquisition in 2013, despite the fact that it had been mothballed and conditions were tough?

When we did this in 2013 it wasn’t our first attempt — we had tried to buy it in 2007, and had spent a lot of time on due diligence but were beaten by a Russian bidder.

The infrastructure is second to none, we have ports and other facilities strategically located. Wales is a very positive environment to work in, the councils [local government] are good, the environment is one of the most positive, so long as you can make steel competitive.

The timing of the restarting is unusual given the current tough conditions in the UK? How confident are you that you can overcome the challenging environment?

The important thing to remember is the difference between primary and secondary production — this is a recycling unit, that melts scrap that is rolled into steel for the domestic market. What I want to champion is the approach of [the US steel producer] Nucor, which uses scrap to produce for the local market. It’s an unbeatable model.

There is no value for scrap so it will automatically adjust to the price of steel. In the UK that gets warped by high electricity prices, and scrap is exported to Turkey, melted there, and returned which is completely insane. We are importing semi-finished steel from the cheapest source, and converting it to finished product which we will sell domestically.

We do the retail end of steel, fencing, carpentry, piping household uses.

We will start a rolling mill, but won’t start the melt shop until clear policies are in place. Russia and Brazil are competitive sources.

Are you planning to scale up this model?

Yes, that’s what we’ve done in Africa and it’s proven to be a viable business model and we look to replicate that in the UK. We are also interested in the US. You have to have a localised business, and sell locally.

The problem with Redcar [the former Tata Steel plant that current owner SSI is closing down] was that it was importing iron ore from Brazil, exporting the product and not adding value. Also we have zero debt, we bought this with equity. We are in a comfortable position.

What are your biggest challenges?

The dumping threat is there, we haven’t succumbed to importing Chinese steel. We are expecting an increase in demand. We are starting at the worst possible moment and we are thriving so we are not worried. I would like to see things progress. It’s a tough market, margins are tough. The one thing we need changed is the UK’s energy policies.

What are your plans for India?

We have investments but will look to get into steel, iron and power production.

It’s a difficult country to operate in — it has its problems today but it will come out of them.

It’s a question of time. We will time the entry into India based on how we perceive the development of India.

There is some twenty or thirty years of damage to the economy that has to be fixed now.

Related Topics
comment COMMENT NOW