Philip Hammond has called on China to reduce steel production as the fate of Tata’s UK steel operations hangs in the balance.

The foreign secretary met his Chinese counterpart, Wang Yi, in Beijing on his way to Hiroshima for the G7 foreign ministers’ meeting. Hammond said the discussion had provided the opportunity to talk about “issues of mutual concern”.

“I urged China to accelerate its efforts to reduce levels of steel production. The UK’s focus is on finding a long-term sustainable future for steelmaking at Port Talbot and across the UK, and I welcomed the potential interest of Chinese companies in investment in UK steelmaking.”

As Chinese domestic demand for steel has fallen following a slowdown in the country’s economy, its steelmakers have been accused of dumping excess production on the global market.



China said on Saturday that plans to shut steel mills over the next five years would cut capacity to an estimated 1.13bn tonnes by 2020 – a figure that still far exceeds domestic demand.

Business secretary Sajid Javid talks to workers at Tata Steel in Port Talbot. Photograph: Ben Birchall/PA

Cheap Chinese steel is one reason why UK-based producers, such as Tata, have found it harder to remain profitable. Higher energy costs in Britain compared with other countries are another factor.

Tata has decided to sell its UK steel plants, including Port Talbot in Wales and Scunthorpe in Lincolnshire. A deal to save the latter from closure could be announced early next week, the BBC reported.



The sale, to investment firm Greybull Capital, would involve a £400m investment package. The move would safeguard about 4,800 jobs and thousands more in supply chains and the local economy.

On Friday, two Scottish steel mills that Tata had mothballed were formally handed over to their new owners, Liberty House, in a deal brokered by the Scottish government.

Production could resume at the Dalzell and Clydebridge plants as soon as August, creating 150 jobs. The plants had employed 270 workers before being closed last year.

Liberty House, which is led by Sanjeev Gupta, has been linked with a bid for the Port Talbot plant, the UK’s largest steelworks employing about 4,000 staff.

However, it is uncertain whether Liberty House has the resources to rescue Port Talbot and Tata’s other sites without large amounts of government funding.

Gupta said the government was committed to finding a solution for Port Talbot. “We don’t yet have a detailed proposition from them, but our feeling is that they are committed to finding a solution, including finding a solution to power.”

He said his company needed to examine any proposal carefully before deciding whether to make a bid.

Analysts at the investment bank Macquarie have said Tata Steel’s UK plants are not viable.

“Structural issues, such as high labour, energy and regulatory costs, make them unviable even over the longer term,” they wrote. “We think the possibility of a new buyer turning these assets around is also slim, as we saw with the Teesside facility [which SSI closed last year] and can be gauged from the prolonged discussion around the sale of its long product business [in Scunthorpe].

“Port Talbot has little future for its blast furnaces and will have to be ultimately shut down. Steelmaking in the UK under the current spread of steel and raw material makes no sense to us at all.”



Tata’s steel plant in Scunthorpe. Photograph: Lindsey Parnaby/AFP/Getty Images

The business secretary, Sajid Javid, travelled to Mumbai this week for talks with Tata management and has called on the Indian company to be a “responsible seller” of its UK plants.

Meanwhile, Hammond said he had also spoken to Wang about the UK’s continued concerns over the case of five Hong Kong booksellers who were detained by Chinese authorities.

Hammond said: “Our diplomatic and economic relationship with China is strong and delivering benefits for both countries.

“We are building on the global partnership established during last year’s successful state visit by President Xi Jinping, by working together closely on international challenges and strengthening our trade and investment links.

“Examples of our global partnership in action include new security and peacekeeping dialogues, a new fund on antimicrobial resistance, and cooperation on Syria, Iran and North Korea.”

The foreign secretary’s tour of east Asia will include a visit to Vietnam.