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Job losses on Teesside, and why China is to blame

SSI mothballs its steel plant in Redcar. Shell abandons plans to drill for oil in Alaska. Glencore's share price crashes on the London Stock Exchange.

Three headlines from today's news, the link between them is China.

China is the world's largest importer of commodities but its vast economy is slowing and the aftershocks are being felt on Teesside and elsewhere in the world.

Over the past twenty years China has industrialised at a furious pace, building roads, railways, airports, power plants, entire cities with steel, copper, aluminium, oil, iron ore and a swathe of other commodities.

But the world's biggest customer is losing its appetite for raw materials and that's creating havoc. The markets are awash, prices have collapsed.

There's still talk of a "soft landing" of course but over time the narrative has shifted noticeably. Goldman Sachs now talks of $20 oil, Investec sees no prospect of a rally and warns there are some pretty big companies that risk being pulled under by the size of their debt.

Meanwhile every recent piece of economic data released by Beijing seems reasonable cause for concern, if not alarm.

The emotional case for intervention in Redcar is compelling, but state aid is technically illegal under EU legislation Credit: PA

China also happens to be the world's biggest steel producer and in the face of wilting demand it's trying to shift as much stock as possible.

All perfectly reasonable, except it is flooding the market with steel at a price others simply can't match.

China's fleet of mills is higher tech, the wages it pays are lower and its currency, the Renmimbi, has slumped, making it even cheaper for foreign buyers.

This is the background to what has happened in Redcar. It's the reason the plant is loss-making, the reason SSI cannot find a buyer and sees no reasonable prospect of being able to produce steel profitably on Teesside for the foreseeable future.

The emotional case for government intervention in Redcar is compelling but the view appears to have been taken that the industry is so heavily loss-making and the immediate future so dismal that to spend taxpayers money in this way would not be sensible.

The economics looks challenging and so do the politics - EU state aid is technically illegal.

As it stands the blast furnace ceases on Saturday.

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