British Steel should get an extra £200m from the government to support it in keeping the UK’s two remaining blast furnaces open until electric replacements are built, according to a proposal put forward by unions.
Chinese-owned British Steel has said it will replace its polluting blast furnaces at Scunthorpe with electric arc furnaces, which can be used to make much cleaner, recycled steel.
However, unions are concerned that a rapid closure of the blast furnaces will result in the loss of nearly 2,000 jobs within months.
The loss of as many as 1,900 of Scunthorpe’s 4,000 jobs could cause “severe socioeconomic consequences” for Lincolnshire, according to a report, seen by the Guardian, from Syndex, a consultancy commissioned by the Community, GMB and Unite unions.
The British steel industry must switch away from coal-driven blast furnaces in order to meet net zero carbon targets. The switch has already cost 2,500 jobs at Port Talbot, south Wales, where Indian-owned Tata Steel shut down its blast furnaces in September.
British Steel has faced financial struggles that led it to the brink of closure before Christmas. Ministers have considered nationalising the company if it would save jobs.
The unions’ proposals, which are aimed at preventing the thousands of Scunthorpe job losses happening immediately, would require an extra £200m to cover carbon costs charged to large polluters.
Syndex argued that the government would have to step in to cover the costs to make retaining both blast furnaces “financially viable”, returning the steelworks to profit by 2027. It said that was a better option than retaining just one blast furnace, because of high fixed costs, or closing both blast furnaces, because the company might lose access to raw materials.
Roy Rickhuss, Community’s general secretary, said the proposals were a “roadmap towards a just transition for British Steel” without a “destructive cliff-edge”.
The government has discussed offering British Steel £500m or more to match the support given to Tata for its upgrade. Ministers have committed up to £2.5bn to the industry on top of the Tata aid, but it is unclear how much of that could be given to British Steel.
The business secretary, Jonathan Reynolds, this week said the government would “champion decarbonisation without deindustrialisation”, as he launched a consultation on its steel plans.
It comes as the industry around the world scrambles to work out the impact of 25% tariffs on all steel and aluminium imports to the US imposed last week by Donald Trump’s administration.
The tariffs add to the difficulties for companies in countries such as the UK that were already having to cope with a global glut of steel amid a years-long crisis for China’s property industry. The head of UK Steel, a lobby group, said the tariffs were “a sledgehammer to free trade”, and the industry is bracing for producers in China and elsewhere to divert steel to the UK and Europe. That could put further downward pressure on prices.
The steel market turmoil could make it more difficult for British Steel, owned by China’s Jingye, to fund a switch to the cleaner technology.
Paul Nowak, general secretary of the Trades Union Congress said: “It’s vital we have a plan to continue to produce steel in the UK. To do that we need to modernise it and to decarbonise it – so we can compete with the countries who are already investing in modern steel making.”
Electric arc furnaces are cleaner but they need extra facilities – which do not yet exist in the UK – to produce steel from iron ore. That has raised concerns among some politicians and defence officials that the closure of Scunthorpe could leave the UK without a key capability for a military nation.
A British Steel spokesperson said: “British Steel is in active discussions with the UK government about the future of our steelmaking operations. Our trade union partners will be an important part of that future, and we welcome their contribution to the debate in the Syndex report.”
