OREANDA-NEWS. June 06, 2016.  The British steel sector has always been a political animal. The industry was nationalized and denationalized twice in the second half of the twentieth century as governments grappled with the weakening economics of the cyclical industry.

Many of its modern problems arguably stem from politicking – lines in the likes of Teesside being shuttered in favor of finishing facilities in south Wales, for example.

Economies of scale that could have been achieved in Teesside were cast asunder, and the plant eventually became a merchant slab producer, ultimately leading to its recent demise as it was uncompetitive in global and European terms.

Under Corus and Tata Steel politics has arguably not been such an issue. Until recently.

When Tata announced it was looking to sell the remainder of its UK business outside the longs division, the question was fairly simple: would the Conservative government provide sufficient support to conclude a sale before Tata withdrew all support.

The company wanted a “timely” deal and did not seem to have any appetite for the drawn-out process that eventually culminated in Greybull Capital buying its longs arm (in a nod to history, Greybull called the business British Steel, which was the name given to the nationalized corporation in 1967).

It took Tata around two years to sell its longs division, after a deal with the Klesch Group fell through.

Whether the Conservative government would deem the sector strategic was perhaps doubtful; the UK can import most of the steel it requires more cheaply than it can be produced domestically.

Business secretary Sajid Javid received much scorn for daring to be on holiday in Australia when the announcement hit.

But Javid returned, and in pretty quick order offered several sweeteners to potential suitors. These took the form of loans, cheaper energy costs and, equally importantly, potentially hiving off of the ?14 billion pension scheme.

The government also reportedly asked Tata to delay the conclusion of its sale until after the UK’s referendum on membership of the European Union.

Herein lies the main motivation for the political support – facing a battle to remain in the EU and probably Downing Street, David Cameron could not let the industry go to the wall.

Brexiteers would seize upon this to show the inadequacies of European measures to tackle cheap imports – even though the UK has been staunchly in favor of the lesser duty rule, which caps the level of duties that can be applied.

Tata pulling out pre-June 23 would have been disastrous for the prime minister, and the wider Remain campaign.

Interestingly, if sources close to the sale talks are to be believed, Tata has ceased upon the government help and is reconsidering the sale. “I’ve heard in political circles Tata is the preferred option,” one bidder told S&P Global Platts. “If I was a betting money I would put my money on Tata; we are in the running, but there’s an argument that we are not the preferred horse,” he said.

Reports suggest Tata is considering a loan from the government to partially replace one from its parent company in India, and may retain control of its assets in south Wales and elsewhere.

For sure, the Tatas must have raised an eyebrow when the government’s desire to help became apparent, given the amount of money the company has hemorrhaged in recent years amid a seeming lack of political support.

And the recent reversal in fortunes of the UK and European coil markets must have helped – China being uncompetitive of late has shielded the market from cheaper imports, giving domestic mills a captive market and significant leverage for price increases.

“In the current phase, binding bids are under evaluation and some bidders have asked for clarifications which we are in the process of providing,” a Tata spokesperson told Platts. “As a responsible seller Tata Steel is engaged with a range of stakeholders, including the UK Government, to give the best chances of future sustainability for the UK business, whoever the future owner of the business might be.”