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Chinese property British steel It has reportedly applied for a £600m taxpayer support package as it seeks help from the next government to upgrade to less polluting technology.
Government officials should review plans that determine the cost of switching from blast furnaces to electric arc furnaces in the company’s steelworks in Scunthorpelincolnshire, Sunday Times reported.
The steel industry is one of the UK industries that could be most affected by a change of government at a general election. Labor leader Keir Starmer, who is heavily favored in the polls to be the next Prime Minister, is sticking to a pledge to invest £3bn in decarbonising the steel industry, despite abandoning other plans for environmental spending.
Ministers will have the final say on support for British Steel after the election. Any deal is likely to be scrutinized because of the Chinese ownership. China produces more than half of global steel and has previously been accused of dumping steel in other countries to gain market share.
Ministers in the new government will also have the final say on whether it has already been agreed A £500m subsidy for India-owned Tata Steel will move on. Rishi Sunak’s government has agreed to a deal with Tata to shift production at Port Talbot in South Wales from two blast furnaces to one electric arc furnace.
If Labor wins power, it is understood that the UK’s ability to produce steel from iron ore, known as primary steelmaking, will be an important consideration in deciding whether to support individual companies, although there is also a willingness by private sector companies sector to invest together.
Shadow business minister Jonathan Reynolds did described primary steel production as a “sovereign capability” because of its role in building nuclear submarines and wind turbines.
British Steel has been struggling financially since it was rescued from collapse in March 2020 by China’s Jingye. The company’s auditors warned in January that the business, which employs 4,500 workers, faced “material uncertainty” about its future.
In November British Steel announced plans to closes its two blast furnaces in Scunthorpe and replace them with much cleaner electric arc furnaces at Scunthorpe and Redcar, in North Yorkshire. The plans could ultimately lead to the loss of 2,000 jobs as electric arc furnaces require far fewer workers.
Tata also plans to cut around 2,800 jobs in the move to electric technology. He argued that any attempt by Labor to renegotiate the terms of the deal could put steel production at Port Talbot at risk.
Alasdair McDiarmid, assistant general secretary of Community, the steelworkers’ union, said Labour’s £3bn investment could be a game-changer for the industry.
“We need the next government to recognize the vital importance of the steel industry to our economy and national security and to show ambition for the future of the sector,” he said. “This is something that has been sorely lacking in recent years, as epitomized by the bargain basement plan that Rishi Sunak signed up to Tata – a proposal that would eliminate Britain’s core steelmaking capacity and leave the country dependent on imports of dirty steel from abroad.’
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Neither Tata Steel nor British Steel’s plans, in their current form, would preserve the UK’s ability to produce steel from iron ore, as is now the case in Britain’s remaining blast furnaces. Companies plan to feed scrap steel into electric arc furnaces to melt the metal.
One of the options for producing steel with almost zero emissions is production of direct reduced iron (DRI). The DRI process removes oxygen from iron ore using gas. If green hydrogen is used, no carbon is released into the atmosphere and iron can be used in an electric arc furnace.
However, neither Tata nor British Steel is likely to consider investing in a DRI plant without major government support. The companies previously argued that their loss-making operations made it difficult to invest without it. Building a DRI plant could cost up to £1 billion, according to some industry estimates.
British Steel declined to comment.
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