Port Talbot closure could severely harm UK manufacturing supply chain

Closing down Tata Steel's UK operations would leave a hole in manufacturers' supply chains, and would spell disaster for small manufacturing companies, as well as damaging the automotive supply chain.

Indian-owned Tata Steel has put all of its operations up for sale, including the country's largest steelworks at Port Talbot which is losing $1.4 million a day as a result of tumbling steel prices and high operating costs.

Small businesses - which currently make up around 95 percent of British manufacturing outfits - will face challenges should Port Talbot close. Should firms look abroad for steel, they will be exposed to swings in the currency exchange rate, as well as higher transportation costs. Companies could also have to hold more stock if buying from the other side of the world, which would impact working capital.

Britain imported 826,000 tonnes of Chinese steel in 2015, up from 361,000 two years earlier, according to industry data. According to the ISSB, China has produced more steel in the last three years than Britain has since the industrial revolution.

Five carmakers built almost 99 percent of Britain's 1.6 million cars last year and all source steel from Port Talbot, with some already looking for alternatives. The UK’s largest carmaker Jaguar Land Rover gets around 30 percent of its steel from the site while Nissan, buys 45 percent.

Supply Chan Digital’s March issue is now live.

Follow @SupplyChainD and @MrNLon on Twitter.

Supply Chain Digital is also on Facebook.

SOURCE: [Reuters]