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Jonathan Reynolds, the business secretary, has announced plans for British Steel as ministers prepare to raid Labour’s £2.5bn ‘green steel’ war chest to persuade British Steel not to shut down its UK operations. held an emergency meeting with its Chinese owner.
Mr Reynolds last week met with Jingye’s chief executive Li Huiming, who has owned British Steel for four years but is now threatening to exit in a move that puts around 2,000 jobs at risk.
British Steel operates the last two remaining blast furnaces in the UK after Tata Steel closed its last blast furnace in September.
The Labor government has set aside a £2.5 billion war chest, specifically to help companies move to greener steel production.
Government figures unofficially suggest that up to £2bn of this funding could be used to support British Steel, but the exact level remains unclear as to what kind of deals could be struck. Depends on.
Last year, British Steel announced plans to close two blast furnaces in Scunthorpe, Lincolnshire, while investing £1.25bn to build two cleaner electric furnaces in Scunthorpe and Teesside. did.
Ministers at the time had offered a potential support package of £300m, but British Steel consistently demanded the same £500m it ultimately offered Tata Steel.
Mr. Ginge said at the time that the company planned to continue operating at a loss until the electric furnace was brought online.
But by September, Jingye had changed its mind and was preparing to abandon electric furnaces altogether and bring forward the closure of blast furnaces to before Christmas, according to industry and government officials.
Ministers have persuaded Mr. Gyeonggi to back away from the brink, but they are still in intense negotiations to reach a new, more generous agreement.
One of the options being considered, and the most expensive, would be for the government to give British Steel a subsidy to keep the blast furnace running until the electric furnace is completed.
“Funding is currently available and it is one of our options,” one government source said, adding that the £2 billion figure was a theoretical upper limit rather than a real-world assumption within the government. .
But despite recent talks between Reynolds and Lee, no breakthrough has yet been found.
Some parties involved in the negotiations are perplexed that despite the generous offers on the table, no bailout deal has yet been signed.
“The Chinese are refusing to accept it for some reason… This suggests a geopolitical problem,” said one person. “Jonathan Reynolds understands that. He made an offer that no one can complain about. He’s doing everything in his power to keep[the production]going.”
Discussions also focus on how the company can continue to serve its major customers, including the UK rail network.
Another idea being discussed in Whitehall is the creation of a future national “direct reduced iron” plant that would use green hydrogen to produce iron from ore, which would involve the involvement of multiple steel companies. It becomes necessary.
Electric arc furnaces have the ability to recycle scrap steel using clean energy, as opposed to blast furnaces that rely on coal, but require fewer employees than traditional blast furnaces.
British Steel recently announced that its pre-tax loss for 2022 had increased eightfold to £408m, with losses continuing in 2023 and 2024.
In its manifesto, Labor announced a new ‘Wealth of Nations’ package aimed at helping five energy-intensive industries – steel, ports, mega-factories, green hydrogen and carbon capture – cope with the transition to net zero. £7.3bn has been pledged to the Fund.
The party has earmarked £2.5bn of this specifically for steel, on top of the £500m it has already committed to Tata’s Port Talbot.
There are fears that workers at Tata Steel and in south Wales will feel unmoved by the less generous £500 million in support given in September to switch to electric furnaces. Approximately 2,500 jobs will be lost.
A deal with British Steel is still likely to involve job losses.
Mr Reynolds has previously complained that the last Conservative government did nothing to enable the construction of a carbon capture and storage project at British Steel’s Scunthorpe plant, which would have forced the company to It also had the potential to provide a “long-term future.” This “significantly limits our options,” he told MPs.
A government spokesperson said ministers were determined not to allow steel production to cease in the UK.
“We are working across government with trade unions and businesses, including British Steel, to ensure a green steel transition that is right for workers and protects the future of the UK steel industry. ”
British Steel said it was in “active discussions with the government”.
It added: “As part of our continued efforts to secure a long-term sustainable future for British Steel in Scunthorpe, we have recently purchased raw materials to continue our operations into the new year. ” he added.
