Earlier this month, Tata Group rejected union proposals to safeguard thousands of jobs at its Port Talbot plant – the UK’s biggest steel works.
The Indian conglomerate is proceeding with plans, backed by £500m of UK taxpayers’ money, to replace two of Britain’s four remaining traditional blast furnaces with greener, less-labour intensive electric arc furnaces (EAFs). The other two UK blast furnaces, at British Steel’s plant in Scunthorpe – owned by China’s Jingye Group – are also closing.
Port Talbot has been a steel town since the turn of the last century when the UK dominated global production. The loss of 2,500 of the 4,000 jobs at the plant has hit the locality hard as I discovered on a visit to this proud south Wales town the day the news was confirmed.
Tata says because blast furnaces use emission-heavy coking coal, shifting to EAFs will help the UK reach its “net zero” targets. Union leaders call this a “green smokescreen” to cut jobs, arguing – with some justification – Tata’s plans will be worse for the environment.
Britain produced just 5.6 million tonnes of steel last year but used 8.9 million – the rest was imported. Reliance on overseas producers is now set to rise. China made over a million tonnes of steel last year, over half of global production. Add in India and Japan and Asia’s share of global steelmaking rises to two-thirds.
So Britain will end up shipping yet more steel, much of it made in blast furnaces elsewhere, halfway across the world in diesel-powered freight ships – hardly an environmental improvement.
Tata has also been accused of “gross hypocrisy” for citing “net zero” in south Wales, while preparing to open a new coke-burning blast furnace at its Kalinganagar industrial complex in eastern India.
The UK pioneered mass iron and steel production in the 18th and 19th centuries. Even in the early 1970s, Britain’s steel industry employed 350,000 people, producing 30 million tonnes a year.
While the sector now supports just 29,000 jobs directly, the median salary is £39,637, up to 60pc above regional averages across Wales, Yorkshire & Humberside, the West Midlands and the North East, where jobs are concentrated. So steelmaking provides well-paid jobs in parts of the country that need them most.
The hollowing-out of Port Talbot and Scunthorpe in the name of “net zero” generates strong emotions. Across steel-making communities I’ve visited over recent months, I’ve heard countless complaints that livelihoods “round here” are being sacrificed because of “metropolitan fixations” and “extreme environmentalism”.
In Port Talbot, when I mentioned the claim ministers make that blast furnace closures would reduce UK carbon emissions by 1.5pc, the responses were often unprintable. Providing government money to close blast furnaces amounts, in the eyes of steel-making communities across the country, to the opposite of “levelling up”.
It is indeed nonsense to argue that closing down our last four blast furnaces will help the UK achieve “net zero” any time soon – not least because of the “captured carbon” in steel imports travelling thousands of miles to reach Britain.
Yet claims about the overwhelming need to retain the UK’s ability to produce “virgin” steel – made in blast furnaces using iron ore – are built on myths of their own.
Unions argue that relying on EAFs, which can’t make steel from raw materials and instead repurpose scrap metal, leaves the UK strategically vulnerable given that virgin steel is needed in certain aspects of the defence and construction sectors.
The reality is, though, that with the UK’s iron ore reserves depleted, blast furnaces are also heavily reliant on imports from often difficult parts of the world. And, having industrialised so early, the UK is actually the world’s second-largest exporter of scrap metal, which it has in abundance.
So, amidst concerns about reliance on China, and getting steel imports from Asia through an increasingly contested Suez canal, using EAFs that are reliant on our own scrap metal could actually enhance Britain’s national security.
Technological improvements mean virgin steel is becoming less vital than it was too – not least in the US, where over 70pc of steel production is now EAF-derived. In the UK, too, Liberty Steel now produces steel for the aerospace sector using EAFs, as does Sheffield Forgemasters for the defence and civilian nuclear uses. Celsa Steel in Cardiff makes reinforced bars for the construction sector, also from scrap.
The big problem with relying on EAFs is the cost of the energy needed to power them. Steelmakers in this country paid an average of £94.92/MWh for electricity in 2022, compared to just £59.02 in Germany and £62.73 in France. UK steel making will always be precarious and uneconomic as long as our energy costs are so high.
So while the shift towards EAFs may make long-term commercial and even strategic sense, it highlights the need to sort out how we regulate and price our energy market.
UK electricity is so expensive because it includes high carbon prices and other policies to cover renewable subsidies. Another huge item is “network costs” – electricity generators need to keep back-up gas- and coal-fired capacity on stand-by, at huge expense, to fill the gap when renewable power is unavailable because the wind isn’t blowing and the sun won’t shine.
Ministers often boast that renewables now generate around 40pc of the UK’s electricity – among the highest shares in the Western world. But that heavy reliance incurs massive costs, given the need to cope with the inherent intermittency of renewable power.
Tackling this conundrum means building more nuclear capacity to provide “baseload” reliable energy, while developing technologies that allow renewable energy to be stored.
Achieving “net zero” should be all about designing and implementing policies that spark the steady development and adoption of low-carbon technologies that work. Instead, we are rushing to close down industrial processes, with all the resulting social fall-out, in a way that won’t cut emissions anyway.
Follow Liam on Twitter @liamhalligan
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2024-01-28 06:00:00Z
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