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Tata back-out further shakes up European steel industry

The company's decision to pull out of the UK has reignited discussions of higher tariffs and more consolidation to save the European steel industry. Ministers from both the UK and Germany called for action.

India's Tata Steel announced Wednesday its intention to sell its British operations. Thousands of jobs may be in peril if the company has to shut the operations there for lack of a buyer.

The news has reignited a number of discussions in the already tense debate over the fate of European steel production, under threat by cheap imports from China.

After the announcement, British Secretary of State for Business, Innovation and Skills Sajid Javid told the BBC that the government's efforts to rescue the country's steel-making assets would not go as far as nationalization.

But he stressed that the European Union needed to act fast to counteract Chinese steel, namely through import tariffs.

"I personally do think that there is more that we need to do," he told the BBC, saying that "speedier action when it comes to tariffs" was likely from the EU.

German Economic Minister Sigmar Gabriel also called Wednesday for action. "We want global competition even in the steel sector, but it must be fair," he told the German daily Westdeutsche Allgemeine Zeitung.

Mergers more likely

Stocks for ThyssenKrupp, Germany's largest steelmaker, have meanwhile risen to their highest level this year, amid heightened speculation that the company could combine its steel operations with those of the leaner Tata.

"The consolidation of the steel sector in Europe makes tons of sense," a metals and mining banker based in London told Reuters.

"But the problem is that the industry has waited for so long and the crisis is so big that you are dealing with businesses which are really cash flow-negative," the banker added.

The European steel industry has been stuck in a rut of costly overproduction since the global economic crisis and Chinese imports reduced its demand.

European steel producers have been reluctant to consolidate their operations, not wanting to cede their market share. But the Tate announcement may finally spark some movement.

The industry in EU has an annual output of $193 billion (170 euros) and directly employs 330,000 people.

jtm/tko (dpa, Reuters)

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