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So British Steel is in trouble. It's been a marginal producer of steel for some time. Europe is not a great place to produce steel. There are other steelmakers in Europe who either do a better job or have managed to specialise. For whatever reason British Steel's costs have been too high.
Now Greybull have some history of trying to bail out other UK businesses with not very much success. But in this case they got their timing right. They came in right pretty much near the bottom of the steel market in early 2016. Steel prices rose. Everything was OK for a while. And a company that was deeply loss-making, after 100 days of trading or so, started to look to be in much better health.
Why are we here again talking about bailouts and help for Greybull, help for British Steel? British Steel, under its previous owners Tata had used effectively the Emissions Trading System. The system of carbon credit trading in the EU where credits are given to various industries, particularly the polluting ones, to offset their emissions.
If they have too many, sometimes, these companies sell those. It turned out that British Steel was using this quite a bit in the last few years, three or four years, maybe longer, and they were selling credits, taking the money, and then when new credits were given to them, at the beginning of the new fiscal year in the spring, they would cover their shorts. And this was a repeated practise.
So what went wrong? What went really wrong, most recently, is last year, one, these carbon credits went up in price a lot. They went from as low as 5 euros per tonne of carbon to 25 most recently. That made that short very difficult to cover. And the worst news came for British Steel when the EU decided, lo and behold, as Britain is leaving the EU it is not entitled to any more of these credits.
It does seem like it's something that they could have at least predicted. This is a cyclical business, steel. The macro situation can be highly volatile, steel prices move up and down. They happen to be going down now, steel prices in the last six months. And it couldn't have come at a worse time for British Steel because iron ore prices, one of the key inputs for the steelmaking business, are soaring. And that's happening because of an accident in Brazil.
So it's a little bit of a perfect storm for British Steel and Greybull, but I have to say that it's difficult to sympathise with them. This is the time when they are supposed to be putting more capital into a business that needs it, and they are trying to drop off the keys to the business and walk away.