British Steel will close its two blast furnaces at its flagship site in Lincolnshire in the next three years and replace them with less carbon-intensive steelmaking technology, putting up to 2,000 jobs at risk.
Britain’s second-largest steelmaker, which has been owned by China’s Jingye since 2020, said it would invest £1.25bn in the restructuring, which will include building two electric arc furnaces. One will be built at its main site at Scunthorpe and a second at an existing facility at Teesside.
The company has promised to keep open the blast furnaces until the new ones are running, which it said could be by late 2025.
Unions said the decision would lead to significant job losses and leave the UK completely reliant on imports for primary steel because the country’s other producer, Tata Steel, is also closing its two UK blast furnaces.
Workers are “deeply concerned” by British Steel’s plans for an “[electric arc furnace] only approach at Scunthorpe and Teesside,” said Roy Rickhuss, general secretary of the Community steel union.
“The plans that British Steel has announced, combined with Tata Steel’s plans, would leave the UK unable to make steel from raw materials and dangerously exposed to international markets,” he added.
Unlike blast furnaces, which use coke to produce iron from ore, electric arc furnaces melt down scrap and recycled steel. They are smaller and emit a fraction of the carbon dioxide of blast furnaces but are not able to produce some of the higher grades of steel required for certain applications such as carmaking.
Tata Steel in September announced plans to close its two blast furnaces at its site at Port Talbot in Wales and build one big electric arc furnace instead, after securing a £500mn support package from the government.
Some industry experts believe the UK should consider building “direct reduced iron” plants in combination with electric arc furnaces. A DRI plant uses natural gas, and potentially once available green hydrogen made from renewable electricity, instead of coking coal to reduce the iron ore.
Both British Steel and Tata Steel’s plans are “necessary but they are not sufficient both to decarbonise and have a sustainable industry that meets the needs of the country,” said Chris McDonald, chief executive of the Materials Processing Institute, an industry research group.
The “missing step” was DRI, he added. “The UK could probably manage with one big DRI plant or you have two, one at Port Talbot and one at Scunthorpe.”
British Steel said the proposed £1.25bn investment was subject to a government grant. The company is hoping for a support package of up to £500mn, higher than the £300mn ministers have offered. British Steel said its plans would reduce its carbon dioxide emissions by 75 per cent.
Xijun Cao, chief executive of British Steel, said it was “committed to manufacturing the home-made, low-embedded carbon steel the UK needs” but added that the UK needed to “adopt the correct policies and frameworks now to back our decarbonisation drive”.
“We remain in talks with the government and, with its support, are committed to making the steel Britain needs for generations to come.”
The UK’s opposition Labour party, which has said it will invest £3bn in the country’s steel industry in the next decade if it wins the next election, criticised what it described as the current Conservative government’s “sticking plaster plans”.
These would “leave the UK unable to produce any primary steel products right at the time when the entire world will be demanding these goods for the net zero transition,” said Jonathan Reynolds, shadow business secretary.
“This is not a serious joined-up plan for the long term for our steel industry and it will make thousands of workers in Scunthorpe redundant,” he added.
