PORT TALBOT in South Wales is known for producing two things: stardust and steel. Its dazzling crop of home-grown film stars stretch back for generations, including Richard Burton, Sir Anthony Hopkins and Michael Sheen. So do its steelworking families. Christian Reed, a project manager, has worked at the Tata Steel plant—Britain’s biggest—for 11 years. His father worked in the local steel industry for 40 years, and his grandfather was a foundry worker. “It’s very difficult to contemplate losing the plant,” he says. “It would be like losing a member of the family.”

The fate of his job and those of about 4,300 other Port Talbot steelworkers, as well as Britain’s loss-making steel industry in general, have become the most poignant part of the political row that has erupted in Britain since Tata Steel, Britain’s biggest producer, said in late March that it planned to sell or close its operations in the country. Opposition politicians have demanded that the government engineer a rescue, either by erecting high tariff walls against cheap steel imports, as America has done (see article), or by going for some sort of nationalisation, as Italy has attempted with the ill-starred Ilva plant in the heel of the country. On April 5th a potential rescuer, Sanjeev Gupta of Liberty House, a commodity-trading company, said he was interested in buying the Port Talbot business, though he wants plenty of government sweeteners before doing so. He has called Britain’s steel industry “probably the worst in the world.”

There are few parts of the rich world where steel remains a good business, however. Port Talbot’s woes are indicative of a global problem—especially in places where makers of unspecialised steel face competition from cheaper producers.

In the eyes of many, including the Welsh steelworkers, the main bogeyman is China, where steel output has ballooned (see chart). The country has produced more steel in two years than Britain since 1900, according to the International Steel Statistics Bureau, and is indeed awash with excess capacity. But this is part of a phenomenon that extends across the developing world. The OECD, a club mostly of rich countries, reckons that in the four years to 2017 steelmaking capacity will have grown by 50% in the Middle East, 20% in Africa and 10% in Latin America.

Meanwhile, the China-led slowdown in developing economies and low oil prices, which have hit the use of steel in rigs and pipelines, mean that demand is severely lagging supply. Even in India, which is supposed to be the bright spot of the global steel market, demand growth is unlikely to recover to levels in the years before 2010 when it embarked on a debt-fuelled infrastructure construction binge. Across the developing world, countries are scrambling to offload their excess tonnage on global markets. In absolute terms China accounts for the lion’s share. But as a portion of its steel output, exports were only 12%. Brazil and Russia exported 24% and 29%, respectively, of their production last year, estimates CRU, a consultancy. The upshot, says Wolfgang Eder, chief executive of Voestalpine, an Austrian steelmaker, is that many other parts of the industry will confront similar problems to those at Port Talbot. It is “a matter of fact”, he says, that costs are too high for commodity steel to be produced competitively in Western Europe. Taxes, energy costs, wages and carbon pricing all put steelmakers at a disadvantage compared with rivals in Russia, Ukraine and Turkey, let alone China. Bitter experience tells Mr Eder there has to be restructuring. In the 1980s a forerunner of Voestalpine went bust and, in the face of competition from eastern Europe, it rebuilt itself into a maker of specialised steel products, such as high-speed rail tracks and aircraft parts. As a result, it has become a rarity: a profitable steel firm. Although higher steel prices and protectionist tariffs have pushed up share prices of American steelmakers in recent weeks, they are also in trouble. The industry is split: on the one hand, struggling integrated firms (such as loss-making US Steel) which use blast furnaces that forge steel out of iron ore, coal and gas; and on the other more nimble firms with electric-arc furnaces such as Nucor that employ scrap as raw material and rely on electricity for fuel. Such “mini-mills” have lower labour costs and can easily be switched on and off to cope with changes in demand. They are likely to be the future of American steelmaking, says Sarah Macnaughton of CRU.

Mr Gupta of Liberty House says that if he buys the Port Talbot plant from Tata Steel, he would replace its recently installed coal-burning blast furnace with an electric-arc one. He hopes for government support to reduce the labour, energy and environmental costs. His business model is unproven, however. Industry insiders say British electricity costs are prohibitively high; he admits that they are “the crux of the problem.” But he hopes to cut a deal with the government to subsidise his existing renewable-energy projects in support of his industrial ambitions. “Our model is to cover all ends of the business, from energy to downstream steel.”

At any rate, much of the European industry will need a full-scale overhaul in order to survive, reckons Voestalpine’s Mr Eder. He notes that, since 1993, the number of European steelmakers has fallen from 26 to seven. But this, he argues, was a “legal”, rather than a “structural”, consolidation: it failed to cut enough capacity. The problems, he says, will grow as steel used in car bodies, for example, declines in weight.

Mr Eder also worries that governments will interfere with the coming shake-out, mainly because they tend to think that the closing of a blast furnace symbolises the death of a region. Instead, he says, they should offer economic support, re-education and other services to those who lose their jobs—rather than “prolonging the process of dying”.

Surprisingly, Port Talbot’s steelworkers seem to agree: they are distrustful of even temporary nationalisation. They note that, at its height, when it was taken over by the state in 1967, the steelworks employed 18,000 workers. Things have gone downhill almost ever since.