British Steel scraps plans to return steelmaking to Teesside
Both planned ‘green’ electric arc furnaces will now be built in Scunthorpe under plans being discussed with Labour ministers
Oliver Gill
, Industry and Leisure Business Editor
Sunday January 12 2025, 12.01am, The Sunday Times
Economics
The Scunthorpe plant is now likely to be home to both British Steel’s “green” arc furnaces
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British Steel is poised to scrap plans to return steelmaking to Teesside in a big jobs blow for northeast England.
The Chinese-owned group had planned to build one “green steel” furnace in Teesside — creating hundreds of jobs in the process — and another at its main works in Scunthorpe, Lincolnshire, under a major business restructuring.
However, both furnaces will now be built in Scunthorpe under plans being discussed with Labour ministers.
The plans would be a blow for Teesside’s Conservative mayor, Lord Ben Houchen, whose region had been promised a steelworks in negotiations led by the previous Tory government.
British Steel has been in negotiations for several years to secure taxpayer funding to move from its heavily polluting furnaces to greener electric ones under a £1.25 billion rescue of the deeply troubled business.
The company has struggled under soaring energy costs in recent years that makes traditional steelmaking unprofitable. Its Scunthorpe works is still losing about £1 million a day. The Chinese group J
ingye acquired the company out of a government-run insolvency in 2020 in the hope of reviving its fortunes.
Houchen had pledged to return steelmaking to Teesside, whose local economy was hit hard by the closure of the sprawling Redcar steelworks in 2015.
Houchen said that building both electric arc furnaces in Scunthorpe was a risk to national security as blast furnace production in Lincolnshire would need to halt while the new equipment was constructed.
“Any gap between primary production by a blast furnace and a new electric arc furnace exposes the UK to national security concerns. As soon as there is a break, the import of cheap steel from China, India and South America could see our steel industry no longer exist,” he said.
“The obvious place to bridge this break is Teesside because you can keep the blast furnaces open in Scunthorpe and build an electric arc furnace and keep steelmaking in the UK.”
The government has said that it will not allow the end of steel making in the UK, however. Whitehall sources this weekend insisted that the location of the electric arc furnaces is a commercial decision for the company.
In April last year, British Steel confirmed reports by this newspaper that it would split a revamp of its operations across two sites.
Xijun Cao, British Steel’s chief executive, hailed the company’s £1.25 billion “decarbonisation plan” to swap traditional blast furnaces for greener electric arc alternatives. “We’re extremely pleased to have received planning permission to build electric arc furnaces at our Scunthorpe and Teesside sites,” he said at the time.
However, the deal, under which the government would have injected up to £600 million of subsidies, was shelved by Rishi Sunak’s decision to call a general election in July.
Labour’s victory at the polls is understood to have prompted a rethink toward building both electric arc furnaces in Scunthorpe.
Nationalisation is also on the table, though this is deemed the “least attractive option” to the government.
The short-term prospects for British Steel are looking up. Fears had been growing last autumn that the Victorian works at Scunthorpe would need to be shuttered, with its last remaining blast furnace operating only intermittently.
Industry sources said that the company’s second blast furnace — named Queen Anne — has been recovered in recent weeks, meaning there are now two blast furnaces at the site.
It can also be reported that Jingye, the Chinese owners of British Steel, have now injected a further £260 million into the business. This takes the total investment by Jingye since it acquired the business from bankruptcy in 2020 to more than £1 billion.
A spokesman for the company said: “This financial support strengthens our business and further underlines Jingye’s commitment to helping us build a sustainable future.”
Representatives from Jingye and British Steel will attend talks with chancellor Rachel Reeves alongside other British and Chinese businesses in Shanghai this weekend.
The government said: “We’re working across government in partnership with trade unions and businesses, including British Steel, to secure a green steel transition that’s right for the workforce, represents a good investment for taxpayers and safeguards the future of the steel industry in Britain.”