Engineering news
Sheffield Forgemasters' facility
Sheffield Forgemasters has said the combination of high UK energy costs and the long-term effects of a global recession has led the firm to seek financial backing, with reports claiming a Chinese state-backed steel firm is among bidders to rescue Britain's oldest steelmaker.
Over the weekend national newspapers claimed that Forgemasters could be saved by financial backing from an arm of the Chinese state. However, Forgemasters' chief executive, Graham Honeywell, told local newspapers discussions with potential investors was always part of a long-term strategy.
The only UK-owned steelmaker, which traces its roots back to 1805, declined to confirm the claims of potential Chinese state-backed funding, and told PE that it could not comment on individual investment deals.
Graham Honeyman, chief executive at Sheffield Forgemasters said: “The economic pressures facing Sheffield Forgemasters are a combination of high UK energy costs, which restrict our competitiveness even against European competitors, the long-term effects of a global recession and a rapid decline in the offshore oil and gas sector brought about by extremely low oil prices.
“These factors are not the same as those which are decimating the UK's bulk steel manufacturing industry and as a manufacturer of high-technology, bespoke products, we face a different set of challenges in seeking a return to stronger trading conditions.
Honeywell stressed that it was "undoubtedly the most difficult trading period the industry has encountered in the last decade" and the circumstances are unlikely to improve in the short-term. He added: "However, the challenge we set ourselves at the management buyout in 2005 was to create longevity for this company through diversification, research and development and product innovation and that policy is what differentiates us from bulk steel producers.
“Seeking external investment to restructure the business has always been fundamental to securing Forgemasters' future and is part of a long-term strategy. This process will continue and until any talks with potential investors have reached a conclusion, all details of those discussions will remain confidential.”
The steel firm employs 760 staff and plays a role in making key parts for Britains' Trident nuclear submarines. The company forges the pressure cylinders that encase the vessels' Rolls-Royce- built reactors. National newspapers claimed that BAE Systems and Rolls-Royce may have been supporting Forgemasters with advance payments.
A spokesperson for Rolls-Royce said that it is not commenting on the reports or able to provide further detail about the work that Sheffield Forgemasters carries out for them.
BAE Systems told PE: “BAE Systems works closely with more than 7,000 organisations in our UK supply chain to develop and manufacture the advanced defence and security products our customers require.
"Sheffield Forgemasters International is a supplier to our submarines business. The terms of our contractual relationships with our suppliers are confidential.”