At the Port Talbot steelworks on the south Wales coast, two 90-metre blast furnaces dominate the skyline. The plant has loomed over the town since an integrated steelworks was built there in the 1950s. It is the economic heart of the area, capable of producing 5m tonnes of steel a year, employing 4,000 people and an estimated 10,000 in the wider community.
A mesmerising orange stream of molten iron flows from the furnace at 1,470C. Yet the industry is having to contend with increased attention on another product of the works: the 5.7m tonnes of carbon dioxide that wafted from an unassuming nearby chimney in 2022 – about 1.8% of the total for the entire UK.
Decarbonising Port Talbot’s two blast furnaces, and another two in Scunthorpe, Lincolnshire, could cost £6bn, according to some experts. The UK industry insists it is unable to foot the bill. The government has offered £300m each to Tata Steel, the Indian conglomerate that owns the Port Talbot works, and China’s Jingye, owner of the British Steel plant at Scunthorpe. (Jingye bought it in early 2020 after the government had spent £588m on a temporary nationalisation while it sought a buyer.) But the companies are lobbying for more, and Tata has warned that the plant’s future is at risk without financial support.
From a mighty industry that forged the Industrial Revolution and boomed after the second world war, Britain’s steel industry is a shadow of its former self. Meanwhile, global steel production has increased more than tenfold since 1950, and has more than doubled since 2000 amid China’s dominance. All of that has led to existential questions: can the UK afford a steel industry, and does it need one?
UK production peaked at 28m tonnes of steel in 1970, but was only 6m in 2022. During that time the industry was nationalised twice by Labour, and privatised twice by the Conservatives, the second time by Margaret Thatcher. Her government forced through a series of closures in 1980 before listing the remainder on the stock market in 1988 as the original British Steel.
Memories of that turmoil – making 68,000 workers redundant in a year and turning parts of the UK against the Conservatives for generations – clearly remain today, along with those of the closure of south Wales’s coal mines. The actor Michael Sheen, who is from Port Talbot, is currently shooting a drama for the BBC set in the town that will address “strikes, division, chaos and a loss of control”, while the plant looms in the background of Steeltown Murders, a recent police procedural.
Today’s UK industry is made up of the parts of the old British Steel. Yet workers are worried that time is running out to save what is left: last month several hundred marched to parliament chanting “save our steel” and singing along to union songs.
“We are in a situation that the steel industry in the UK is near collapse,” said Sharon Graham, general secretary of the Unite union. “We need to invest in green steel.”
A green prize
To list the products that use steel is to list much of modern life. Port Talbot provided most of the steel in the Nissan Leaf electric car, built in Sunderland. Heinz baked beans “tins” are made of its steel, as are radiators in many homes. Construction is the plant’s biggest market: Tata made blue cladding for Everton’s football stadium, and red cladding for Liverpool’s Anfield on the other side of Stanley Park. Another crucial growth area – and one key for the UK’s energy security – is zero-emissions power: wind turbines sit on steel stalks, and nuclear reactors are encased in steel.
The prize for the UK in carbon-free steel would be a modern, green industry. Failure would mean the loss of thousands of jobs and the UK’s ability to make its own steel – and would do nothing to reduce Britain’s contribution to global heating.
“If we stopped manufacturing steel in the UK we would lose the supply chain that serves us,” said Russell Codling, Tata Steel UK’s director of marketing and business development. “Our customers’ supply chains will become less efficient too and some of them will eventually close or relocate to other countries. As the UK, we would effectively outsource our manufacturing and our economy diminishes.
“We just export our carbon emissions to somewhere else, and lose the economic value that pays for our NHS and other national services.”
In south Wales’s steelmaking heyday in the 1970s, the industry employed as many as 35,000 people, producing 10m tonnes a year.
Port Talbot is expected to make 3.6m tonnes of steel this year, below capacity, but Tata argues that producing lower-carbon (and eventually zero-carbon) steel could give British steelmaking a new lease of life. Carbon border adjustments – essentially adding the environmental costs of carbon pollution on to imported steel – could also level the playing field for UK producers versus rivals abroad that do not have to worry about greenhouse gas emissions.
Electric arcs
Tata, which also owns Jaguar Land Rover, insists it has made no decisions on what technology it will pursue, but it is widely expected that it will replace at least one blast furnace with an electric arc furnace, which uses high-voltage currents to melt scrap steel. The technology would mean a change of direction for both Port Talbot and Scunthorpe, eschewing iron ore and coal and the ability to make new steel.
“It makes so much sense in the UK,” said Codling. “We’re going to have an excess of renewable energy and the UK generates 10m tonnes of waste steel scrap a year that would otherwise be shipped to somewhere else in the world.”
Stephen Kinnock, the Labour MP for Aberavon, which contains Port Talbot, said that electric arc furnaces would probably play a role, but added that he hoped hydrogen investments would be considered further down the line. Whatever the technology choice, he said there was a clear need to keep a steel industry in the UK.
“We must ensure there is a transition to the new technology that maximises the retention of the current workforce,” he said.
Political wrangling
The government is wary of handing over hundreds of millions of pounds in subsidies to companies with deep pockets.
The steel industry argues that it is unrealistic to think that foreign companies will spend heavily on the UK – which suffers from an energy costs disadvantage – when the US, Germany, and France have already pledged billions of dollars in state aid.
The British operations are unlikely to be able to fund billions in investment themselves. Tata Steel UK has lost a cumulative £1.4bn since March 2016; Scunthorpe made an operating loss of £140m in 2020 and its 2021 accounts are overdue.
Talks over aid have also been complicated in Tata’s case by its simultaneous request for £500m in support for a “gigafactory” at a site in Somerset to supply Jaguar Land Rover’s electric cars with batteries. The government is keen to lock in a political victory after the high-profile failure of the Britishvolt battery startup, but an important meeting between Rishi Sunak and Tata boss Natarajan Chandrasekaran to confirm the deal is yet to take place. Tata is privately thought to be treating negotiations on the gigafactory as inextricable from the steel plant, although a government source insisted they were separate issues.
How to make green steel
Decarbonising steelmaking is fiendishly difficult. Unlike cars, home heating systems or large parts of manufacturing, steel blast furnaces cannot just switch to renewable electricity.
Blast furnaces require coking coal and iron ore to be fed in constantly. “The furnace doesn’t know it’s Christmas,” says a worker in the dark underbelly of the tower. The stream of molten iron is transported by rail to cavernous halls on another part of the site – every surface glittering with carbon dust. Ladles the size of a house carry the metal through the halls, where carbon and other impurities are removed to finally produce steel to be rolled into slabs. The coal in the process is essential for the chemical reaction in blast furnaces to reduce the ore, removing the oxygen and producing inevitable carbon dioxide.
There are three main options to produce steel without adding that carbon to the atmosphere.
The first is carbon capture and storage, which can be used with blast furnaces. Jingye is seriously considering a plan for Scunthorpe that would pipe CO2 from at least one blast furnace to salt caves under the North Sea. That would be much more difficult for Port Talbot, which lacks the right geology nearby.
Another option is producing steel with directly reduced iron (DRI), a process that replaces the coal with gas. DRI plants already exist in several places using methane, which also produces carbon emissions. However, companies, notably Sweden’s Hybrit, are testing the same technology with green hydrogen – with the gas made from water using renewable electricity. Hydrogen DRI plants are not yet operating on a large scale, however.
The third option is an electric arc furnace, which uses high-voltage currents to melt scrap steel from old buildings or cars. Electricity passes through two electrodes, and jumps into a third neutral electrode, generating enough heat to melt the steel. That technology will play a key role in the UK.
There are already electric arc furnaces in Cardiff, Sheffield and Rotherham, which can run on zero-carbon electricity. The owner of the Rotherham furnace, Liberty Steel, has said it will be carbon neutral by 2030 – although that goal may be complicated by an investigation into the company, owned by the businessman Sanjeev Gupta, by the Serious Fraud Office.
Roy Rickhuss, general secretary of the Community trade union, said the government needed to make energy prices competitive and offer similar support as rival countries.
“But the companies must step up too,” he added. “Ultimately they own our businesses, and we hold them accountable for their actions.”
The steel industry has already won the argument with the Labour party, which has pledged £3bn to decarbonise steel, plus make big investments in renewable energy to drive down prices. Bill Esterson, the shadow minister for business and industrial strategy, said that the party would also ensure that UK defence manufacturing used British steel.
“You cannot have a modern, thriving economy without core industries, especially steel,” said Esterson. “We are in a very strong position in this country, if we only invest. If we don’t have a steel industry we become completely at the mercy of the market.”
The government said it was giving the steel industry “hundreds of millions of pounds of support” via tax reliefs for energy-intensive industries, in addition to the £315m industrial energy transformation fund. It was also planning to cut some green levies on electricity.
In a statement, Kemi Badenoch, the business and trade secretary, said: “The steel sector plays a vital role within the UK economy – supporting local jobs and economic growth and I’m committed to securing a decarbonised, sustainable, and competitive future for the UK steel sector.
“Negotiations with parent steel companies are ongoing but the public should be in no doubt that the government is backing the steel sector.”
Bigger than economics
The loss of a steelworks can be a hammer blow to a region, as Teesside has found most recently with the closure of Redcar’s blast furnace in 2015. The furnace was demolished in November, after the loss of 1,700 jobs. (The Conservative government has tried to champion a regeneration of that site, but it has been hit by allegations, which have been strongly denied, of “corruption, wrongdoing and illegality”.)
The entrepreneur Patrick Dodds knows better than anyone how a steelworks supports an area’s economy. He founded Port Talbot-based Hexigone, making corrosion-resistant coatings, after completing a doctorate funded by Tata Steel and working for the company elsewhere.
“I could delve into local sources of knowledge, that have that manufacturing knowledge,” he said. “There’s a stream of talent that flows into these companies from Tata.”
For the steel towns, the repercussions of a failure to decarbonise would be grim. In Port Talbot, steelworks wages are 36% higher than the regional average, according to Tata, making steel workers the key source of spending for other businesses. Dodds was at a Tata event in 2016 when the news that the company was (briefly) considering pulling out of the UK came through. Everyone there was “gutted”, he said, and he struggled to get a mortgage because of the uncertainty.
“I can’t even describe what would happen to the area” if the plant closed, said Dodds. “There are not thousands of vacancies around here. There’s not another industry to step in and take its place.”
But for workers the implications of failure to upgrade will be broader than economics.
“This isn’t in the heart, it is the heart of the community,” said Gary Keogh, a union representative at the Port Talbot plant. “Our people, they need hope of what is coming.”
• This article was amended on 18 July 2023. An earlier version said that Tata made blue beams for Everton’s football stadium and red beams for rival Liverpool’s. This should have said cladding.
