IN a scenario very similar to the one being played out in the crude oil market, steelmakers on a global scale are playing a loss-making waiting game – hoping prices reverse before they are forced out of the game altogether.

Due to the economic slowdown in China, the demand for steel has waned significantly.

This translates into a huge glut of Chinese steel which is no longer required domestically; prompting the Chinese to export it.

As a result, China is now exporting 100 million tons of steel per year at prices which are below even the Chinese cost of production, let alone the costs associated with UK steel production.

Because of this, the price of slab steel has dropped by 40 per cent in the past year, from around £318 per ton to under £190 per ton.

A month ago, the SSI UK plant, in Redcar, stopped production, with the loss of 1,700 jobs.

The closure is no doubt a tragedy for the workers, for their families and for an area that is dependent on the plant for high-quality jobs.

But, even if it is too late for Teesside, and let’s hope not, what can politicians do to prevent the damage spreading to the rest of the UK industry, which still employs 30,000 in total?

And what needs to happen in China for the market to bounce?

UK Steel said: “As well as battling against falling prices, a rise in unfairly traded steel imports and a persistently strong pound, the sector is being hit by disproportionate policy and business costs, higher than those faced by both global and European competitors.

"These costs include an additional £130m a year to energy prices by climate change policies that make the UK steel sector’s energy costs up to double those of French and German plants,” it said.

“At the same time, business rates in the UK are up to 10 times higher, while new air emissions limits from the EU industrial emissions directive will add another £500m to costs by 2020.”

The Government has promised to hold a steel summit to map out a future for the industry.

It needs to deliver relief on green energy costs, bring business rates in line with European competitors and, along with the EU, try to tackle any unfair Chinese steel-dumping.

As for the 'Corbynistas', they need to rethink their rhetoric on soaking businesses for more taxes and ending subsidies, or as they call it, corporate welfare.

These policies would simply increase the UK’s cost of steel production and force more producers out of the market.

In China, analysts believe only a very sharp reduction in capacity will allow the markets to stabilise.

Until either Chinese capacity is reduced or a resurgence in China’s economic growth is realised, prices will inevitably continue to slide.

Indications from the major mining companies at present suggest that Chinese steel demand will probably keep falling until early next year, a quarter longer than originally expected, as infrastructure spending is delayed.

Money allocated to specific infrastructure projects in China, which had been expected to help halt declining steel demand, has been taking longer than expected to spur activity.

Tom Daniels works in investment management at Newcastle wealth firm Brewin Dolphin.

The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin. No director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.