The future of state-controlled British Steel appears to be electric, as Business Secretary Peter Kyle has now publicly backed a transition to electric arc furnaces (EAFs) for the Scunthorpe plant. The government, which took emergency control of the site in April, is working on a new strategy to secure its long-term viability.
Kyle’s confirmation that he “do[es]” expect to see EAFs in Scunthorpe is the clearest signal yet of the government’s direction. The move is driven by the urgent need to decarbonise steel production—the plant’s current blast furnaces are major polluters—and to provide a sustainable future for the site, which was threatened with closure by its Chinese owner, Jingye Steel.
This strategic direction, to be detailed in a December report, is not without major complications. A shift to EAFs, which melt scrap, would raise doubts about the future of the plant’s blast furnaces and the thousands of people they employ. It also signals a move away from primary steelmaking (from iron ore), a capability the government had previously vowed to protect.
The financial backdrop is also precarious. The government set aside £2.5bn for the steel industry, but Kyle admitted “hundreds of millions” of that has already been spent just to keep British Steel and the insolvent Liberty Steel running. This leaves less for the significant capital investment a new EAF would require.
Industry and union stakeholders are watching closely. Unions are demanding a “just transition” that protects jobs, while lobby groups like UK Steel are calling for lower energy prices and fair trade policies. Any plan must also include a deal with Jingye, the plant’s legal owner, to formally exit.