An employee works at the Changning steel and iron factory in Changzhi, Shanxi province. Reuters Britain's steel industry is on the brink of collapse and a lot of people are blaming China for a glut of cheap production which has pushed down prices and made it impossible for UK companies to compete.

But it's not just China you have to blame. It is also Europe.

The reason the UK steel industry is failing is two-pronged:

1. Steel prices in Europe — the place Britain is exposed to the most for prices — are ridiculously low, making it difficult for the UK to compete.

2. EU state aid rules prevent the government from helping out the nation's steel companies — EU law strictly prevents parliament from bailing out dying companies.

Firstly, let's take a look at steel prices in Europe.

Steel prices have fallen to their lowest levels in 12 years and a range of British companies are struggling to survive. This is because prices in Europe and Asia are so low, Britain can't compete. It's just cheaper to import steel because it's too costly to produce it in the UK.

Look at how low prices are compared to March 2012:

Despite its cheap production, China has the exact same problem that Tata and Port Talbot do now. China has a steel capacity surplus of 400 million tonnes, and the government wants to shut down up to 150 million tonnes of that capacity in the next five years, according to The Guardian.

On the flipside, falling global demand and a strong pound make steel exports more expensive. Simply put, Britain is in the worst spot right now. Our steel is too expensive. There is too much of it. And no one wants to buy it.

The 98-year-old Redcar steelworks in the North East closed down at the expense of 2,200 jobs in October and Tata Steel is putting up its entire UK business up for sale. Meanwhile, parts of Caparo Industries' steel operation is in administration and 1,800 people are set to lose their jobs. It's a bloodbath.

Rakesh Arora, an analyst at Macquarie, told the Financial Times on Thursday that producing steel in the UK "makes no sense actually":



Steel’s labour costs there [the UK] at about $200 per tonne of production, compared with as little as $10 for its Chinese peers. "That gap was too difficult to bridge with the best of operating efficiencies," Arora said.

Considering prices are around £285 per tonne for steel, according to pricing agency Platts, you can see how Chinese steel companies can remain profitable while British companies struggle to make ends meet. In fact, Britain's biggest steelworks Port Talbot is said to be losing around £1 million per day.

China produces half the world's steel and has ramped up production massively over the last 30 years. Take a look at the chart.

China used to only mainly export its steel to other Asian countries but as its economy began slowing down, it started to place — or "dump," as anti-China critics say — lots of its cheap steel on overseas markets, which pushes down prices.

China's crude steel production over the last decade has exploded, bringing hundreds of millions of tonnes more per year to the market.

But this is where it gets a bit sticky.

The Worldsteel Economics Committee forecasts only extremely modest growth in steel demand in 2016.

Low demand means exporting is difficult. This is on top of lower Asian and European steel prices remaining low.

In tandem, Britain's dependence on Europe, not China, for steel imports means the UK is more exposed to lower European prices:

So the steel glut isn't all China's fault — it comes from the EU too. Just look at the latest crude steel production figures from the World Steel Association:

Peter Brennan from Steel Business Briefing told the BBC how "the real competition" comes from European suppliers, "who are helped by the euro's relative weakness against the pound." He added that higher business costs are keep Britain in an uncompetitive position. For example, the British government's business rates are around 10 times higher than competitors' in France and Germany, according to UK Steel.

But this is where the problem with the EU really comes into it.

Prime Minister David Cameron is stuck. EU law bans countries from bailing out their own inefficient, uncompetitive industries.

Labour leader Jeremy Corbyn wants him to "intervene" to save Britain's steel industry. After all, thousands of jobs would be lost and the impact on communities would be significant.

But it would be illegal for Britain to bail out steel companies like it did with the banks, under EU law.

So the British government's hands are tied.

The EU could increase tariffs on Chinese steel. But the EU has already decided not to do that in order to protect the thousands of European companies who would suffer if they were required to buy more expensive European steel.

If Britain left the EU, the government could nationalise the steel industry or pump cash into the ailing industry.

But even that might not be the right thing to do. It's not really viable, considering the loss-making Port Talbot site alone haemorrhages over £1 million per day. And who would buy the UK's nationalised steel on the international markets, given that it costs more than everyone else's?

So the grim reality is that this isn't all China's fault, and the UK may better off just closing everything down.

The EU has to take some responsibility for this, and it could start by offering unemployed steel workers retraining and education to get them into new jobs, or relocation funds so they can move to other places where their skills are needed. That doesn't sound as dramatic or politically exciting as demanding economic punishment for China or the nationalisation of UK steel.

But it's probably the right thing to do.