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British Steel was forced to close one of its blast furnaces in Scunthorpe last year after using the wrong type of coal, in the latest sign of the crisis surrounding the Chinese-owned group's UK operations.
The disaster raised initial fears among some government officials that British Steel might be trying to sabotage its loss-making plant, but ministers were reassured that the closure was due to an administrative error.
The revelation came after it emerged that British Steel had abandoned its plans to bring steelmaking back to Teesside, as part of… Government-backed restructuring The company's operations to transition to greener forms of production.
Initial plans put forward by the company, owned by Chinese firm Jinji, envisaged building one electric arc furnace in Scunthorpe and another on Teesside, but people familiar with the situation have confirmed that the aim is now to build two at the Lincolnshire site.
Lord Ben Houchen, the Conservative mayor of Tees Valley, claimed that the Labor government opposed the idea and instead preferred to concentrate British Steel's new electric arc furnaces at its existing plant in Scunthorpe.
“It's disappointing,” Houchen told the Financial Times. “There was clearly collusion by the Labor government and the unions not to come to Teesside.”
Allies of Jonathan Reynolds, the business secretary, said the future structure of the business was a commercial decision for British Steel, but pointed out that Teesside had proven to be an attractive location for inward investment.
The company's decision to abandon plans to build a 'green' kiln on Teesside and another at its flagship works in Scunthorpe was first reported in The Sunday Times.
Problems with British Steel's Queen Anne kiln in Scunthorpe emerged last year after the company began importing coke after closing the coke ovens that feed its two kilns in 2023.
Engineers mistakenly obtained coke that was a mixture of “low quality and low condition,” resulting in the furnace being inactive, according to several people familiar with the situation.
The closure raised initial concerns in the government that British Steel may have tried to destroy its own factory to justify closing its loss-making U.K. operations, according to people familiar with the issue.
But a government insider said Reynolds believed it was down to “inefficiency and cost-cutting” rather than any malicious intent. Another person familiar with the situation said engineers misunderstood the complexities of the blast furnaces the company required.
Talks between the government and the company regarding the size of the support package to restructure its operations are still ongoing. British Steel's latest accounts, filed last year, showed that Jingyi injected £100m of shares into the company in October 2023.
British Steel has said it is looking for a sum in excess of the £500 million agreed for Tata Steel's plant in Port Talbot in Wales to build an electric arc furnace. The government said it would invest £3 billion. Including £500 million for Tatain the British steel industry over the next decade.
Union representatives said their priority is to keep the ovens open as long as possible. Electric arc furnaces are less carbon intensive but also employ fewer people, and the shift to greener forms of steelmaking could put up to half of the 4,500-strong workforce at risk.
“It is essential to retain two blast furnaces at Scunthorpe to facilitate the transition to new technologies on site,” said Alasdair MacDiarmid, assistant general secretary of the community union, whose members include steelworkers.
“This is a priority for us as a union and is at the heart of the proposals we presented to Jingyi, and we are now awaiting the company’s response.”
British Steel declined to comment on the reasons for the failure of the Queen Anne furnace, but said that both furnaces are now working. It was continuing to purchase “raw materials to support the iron and steel industry.”
She added that the company remained in “ongoing discussions with the government about our decarbonisation plans and the future operations of our business in the UK”. Although progress continues, “no final decisions have been made,” she added.
