UK launches 'green efforts' to salvage its steel industry

Britain's steel industry needs to transition to new technologies and greener production methods if it's to guarantee its survival, a member of the British Parliament has told The National.

Nic Dakin, the MP for Scunthorpe, where British Steel has a large steelmaking plant, said the industry is in a period of “significant restructuring” and that “investment will ensure that this industry has a positive future for the UK”.

“We need a steel industry,” he told The National. “Ironically, we need a steel industry to help green our future.”

Blast furnaces have been part of Britain's steel industry for more than a century and play a significant role in the country's carbon emissions. However, new green technologies and the arrival of electric arc furnaces have placed the industry on the brink of major change.

“If it wasn’t for climate change, we would simply say ‘we don’t do steel any more in the UK’ – there’s considerable overproduction of steel globally and other countries currently do it cheaper than we do,” Paul Ekins, professor at the UCL Institute for Sustainable Resources and author of Stopping Climate Change: Policies for Real Zero told The National. “So, if it was simply a market-based matter, I think companies would simply withdraw. But there is this element of wanting to decarbonise steel, given that we’re always going to need steel. Steel is a really important part of any industrial system, not least to make the renewables that are going to supplant fossil fuels.”

Britain's steel industry is already taking steps into a greener and lower-carbon future. At the end of September last year, four blast furnaces were closed at the UK's largest steelmaking plant at Port Talbot in South Wales. The owners, Tata Steel, shut down the last coking coal-fired blast furnace, which will eventually be replaced with EAFs, to reduce carbon emissions. While the blast furnace fires went out, the political heat went up as Tata announced a restructuring plan that will cost 2,800 jobs. At the time, Tata said it was “deeply conscious” of how difficult the closure was, but the Unite union called the move “industrial vandalism”.

Blast furnaces create steel by smelting iron ore, coke (a coal-based fuel) and limestone. Hot air is then blasted into the furnace creating temperatures over 1,000°C. Arc furnaces are filled with cold recycled steel. Electrodes are lowered into the furnaces which heat the furnace like an oven and the scrap steel melts. EAFs use far less energy and produce a fraction of the carbon that blast furnaces emit.

From a low-carbon point of view, EAFs win the day. However, as a general rule, EAFs can only melt scrap iron, of which Britain produces about nine million tonnes a year. At the moment, to get steel from iron ore, you need a blast furnace. There are some exceptions – for example, Direct Reduction (DR) iron EAFs can be used. But the iron ore has to be of very high quality with an iron content of above 67 per cent. The issue is, that this grade of iron ore only makes up about 4 per cent of the world's total supply.

A new Steel Council

Three months after the last blast furnace cooled at Port Talbot, the UK government convened the first meeting of the country's new Steel Council on Tuesday. The group includes the chief executives of the steel producers Tata Steel, British Steel and Liberty Steel, representatives from the GMB Trade Union, companies like Marcegaglia UK that use steel products and government ministers.

“The industry and steel communities have had enough of lurching from crisis to crisis – this government will take the action needed to place steel on a secure footing for the long term,” Business Secretary Jonathan Reynolds said. “With the launch of the Steel Council, we’re placing workers and local communities at the heart of our plans as we bring forward up to £2.5 billion of investment to secure growth right across the country.”

More than a year ago, British Steel announced it would be shutting down the blast furnaces at its plant in Scunthorpe in Lincolnshire, but last November, it said they would keep working well into this year. It is thought that all the UK's blast furnaces will be shut down and steel production will become fully electric. The local MP, Mr Dakin said that “the future of steel is to move towards electric arc production of steel in the UK”.

“Blast furnaces may still have a role in that. But we need a clear strategy – we will still need some primary steelmaking capacity. That currently is through blast furnaces, but in the future might come more from DR iron, which is a hydrogen-supported technology,” he said.

As such, for Prof Ekins, the advancement of technology is crucial to not only the greening of the steel industry but also its survival. “I think it would be marvellous if the UK, with its steelmaking tradition, were to follow some of the European countries in pioneering these technologies for low-carbon steel, because if we can master those technologies then there will be considerable demand for low-carbon steel from those industries that have signed up to emission-reduction targets themselves and they will need to source their steel in ways that does not produce large carbon emissions,” he said.

A niche player?

In 2023, the industry contributed £2.3 billion to the UK economy – the equivalent of 0.1 per cent of total economic output. Meanwhile, Britain is not a significant player in the traditional global steel market – on a global scale, Britain produced 5.6 million tonnes or 0.3 per cent of the world’s total. China produced 1,019 million tonnes, 54 per cent of global production. The UK is Europe's eighth biggest producer, ranking behind Germany, Italy, Spain, France, Austria, Poland and Belgium.

As such, for Jen Carson, the head of industry at Climate Group, concentrating on producing low-carbon green steel would be a sensible option for the UK, given that eventually, the demand will increase. “Companies failing to adapt risk being left behind as markets and regulators shift to prioritising green steel production,” she said. “The future of the global steel industry is green. By transitioning the way steel is produced, the UK is positioning itself as a key player in global markets.”

Many analysts also point out the oversupply in the global steel industry. According to a recent report by UK Steel, global steel excess capacity in 2023 was estimated at 543 million tonnes, more than 70 times the size of the UK market. Indeed, with the weakening demand in China, its steel industry is expected to have exported at least 100 million tonnes last year. That figure alone would meet UK steel demand for 13 years. Normally, such a flood of cheaper steel on to the global market would worry domestic producers in several countries, not just the UK. However, moving into the more niche area of producing low-carbon steel through EAFs would have its advantages. Not only is that market set to grow in the coming years, but at least in the short-run, the low-carbon steel will command higher prices than the traditionally-made product.

“The UK has not been a major volume supplier to the world market for many years and the future is unlikely to reverse that,” Matthew Watkins, senior steel analyst at CRU told The National. “However, there are multiple examples of strategies for niche focus, rather than outright volume focus, being successful in the steel industry. Bigger is not necessarily better.”