Crisis talks between the government and the Chinese owner of British Steel have ended with no deal in place, as the Scunthorpe plant races against time to secure the raw materials needed to keep its blast furnaces running.
Jingye, which promised a “new chapter” in UK steelmaking when it rescued British Steel in 2020, said last month the site’s two blast furnaces were no longer financially sustainable, raising fears for the future of 2,700 workers.
The government said it was prepared to nationalise the company if necessary, although a cabinet minister said on Wednesday morning that a commercial solution, thought to include taxpayer-funded support, was “within sight”.
Negotiations are expected to continue after the series of meetings in Scunthorpe on Wednesday afternoon involving government officials, Jingye and trades unions ended without a deal.
One source familiar with the talks described them as “strained” and said the clock was ticking to reach a deal because of a raw material supply crunch.
A second source said British Steel was running out of time to secure coking coal and iron pellets – crucial components of the steelmaking process – to maintain operations at the two furnaces, nicknamed Queen Anne and Queen Bess.
A shipment of coking coal is due to arrive from Japan at the Immingham port on the Humber estuary on Thursday, but the source said it was not clear whether Jingye was prepared to pay for it. They said iron pellets had already come into dock but had not been fully paid for.
One option under consideration is to “bare tap” or “salamander tap” Queen Bess, which involves reducing its operations to a minimum, allowing Queen Anne to operate at full capacity until mid-May.
The company is preparing to idle one of the furnaces next week, according to the Financial Times.
In the meantime, Jingye is thought to be asking for financial support from the government, which is under increasing pressure as the time for ordering raw materials ebbs away.
Last night the BBC reported that the government had offered to buy the coking coal essential to continue steel production and was preparing a written offer for Jingye.
Jingye has already rejected a government offer of £500m in support to help convert its two blast furnaces, which make “virgin steel” from raw materials in an energy-intensive process, into greener electric arc furnaces that use scrap metal.
The Chinese company is thought to have demanded closer to £1bn in funding to go ahead with the plan.
Negotiations have been complicated by factors including Donald Trump’s 25% tariff on UK steel, an industry already buckling under a storm of adverse conditions, including the UK’s high energy costs.
Another complication is that the UK government is entering into the discussions without having completed a review of the country’s steel strategy, a significant part of which will be a verdict on whether the UK needs to make virgin steel.
The government has refused to rule out nationalising the company, which was privatised under Margaret Thatcher in 1988, with Keir Starmer saying on Tuesday that “all options remain on the table”. The trade union Unite on Wednesday called for nationalisation, given that British Steel’s output is crucial to large infrastructure projects and provides 98% of Network Rail’s train tracks.
The culture secretary, Lisa Nandy, said earlier in the day that a “commercial solution” was still possible, as the business secretary, Jonathan Reynolds, prepared for discussions with Jingye.
The two blast furnaces at Scunthorpe are the UK’s last, after two at the Port Talbot site in south Wales, owned by the Indian conglomerate Tata, went cold last year.
The UK would be the only G7 economy without the ability to make virgin steel if the Scunthorpe factory shuts down. Once blast furnaces have stopped operating it is prohibitively expensive to start them up again.
Simon Boyd, the managing director of Reidsteel, a customer of British Steel, told the Today programme on BBC Radio 4 that government intervention was the “only solution”.
The government has previously promised £2.5bn to help the steel sector. On Wednesday, officials pointed to the government’s “supercharger” scheme, which they said would provide more than £300m to help the sector grapple with the highest energy costs of any steel sector in Europe.
Unite’s general secretary, Sharon Graham, said: “While Unite is in continuing dialogue with British Steel and the UK government, we are very clear that if a deal cannot be struck to secure the long-term future of the steelmaker under private ownership, that the government must bring it under public control in the national interest.”
A joint statement from the Department for Business and Trade and British Steel said: “UK business and trade secretary Jonathan Reynolds and officials met with the CEOs of Jingye and British Steel earlier today for discussions on steelmaking in Scunthorpe.
“Both sides welcomed continued cooperation in talks to find a way forward. The UK government thanked Jingye for their respect for the workforce during this process, and work continues at pace to find a resolution.”
