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British Steel was forced to close one of its two blast furnaces in Scunthorpe last year after it used the wrong type of coal, the latest sign of a crisis to engulf the Chinese-owned group’s UK operations.
The debacle sparked initial fears among some government officials that British Steel might be trying to sabotage its own loss-making plant, but ministers have been assured that the closure was a management error.
The announcement came after it emerged that British Steel had abandoned plans to restore steelmaking in Teesside, as part of government-backed restructuring of the company’s operations to switch to greener forms of production.
Initial plans put forward by the company, which is owned by China’s Jingye, called for one electric arc furnace to be built in Scunthorpe and one in Teesside, but people familiar with the situation confirmed that the aim is now to build two in Lincolnshire.
Lord Ben Houchen, the Conservative mayor of Tees Valley, claimed the Labor government opposed the idea and instead favored concentrating British Steel’s new electric arc furnaces at the existing Scunthorpe plant.
“It’s disappointing,” Houchen told the Financial Times. “It’s clear there was a collusion between 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 noted that Teesside had proved an attractive location for inward investment.
The company’s decision to abandon plans to build one “green” furnace on Teesside and another at its main facilities in Scunthorpe was first reported by the Sunday Times.
Problems at British Steel’s Queen Anne furnace in Scunthorpe emerged last year after the company began importing coking coal following the closure of coke ovens supplying its two furnaces in 2023.
Engineers mistakenly sourced coke that was a mix of both “low quality and poor condition,” causing the furnace to become inactive, according to several people familiar with the situation.
The shutdown sparked initial government concerns that British Steel may have tried to damage its own plant to justify closing its loss-making UK operations, according to people briefed on the matter.
But one government insider said Reynolds believed it was down to “incompetence and cost-cutting” rather than malicious intent. Engineers misunderstood the complexity of the company’s demanding blast furnaces, said another person familiar with the situation.
Discussions between the Government and the company on the scope of the support package for business restructuring are still ongoing. British Steel’s latest accounts, filed last year, showed Jingye had invested £100m of equity in the business in October 2023.
British Steel has made it clear it is seeking more than the £500m agreed for Tata Steel’s Port Talbot, Wales plant to build a single electric arc furnace. The government has said it will invest £3 billion, including £500m for Tatainto the British steel industry over the next decade.
Union representatives said their priority is to keep the blast furnaces open as long as possible. Electric arc furnaces are less carbon intensive, but they also employ fewer people, and a shift to more environmentally friendly forms of steel production could put as many as half of the 4,500 employees at risk.
Alasdair McDiarmid, assistant general secretary of the Community union, whose members include steelworkers, said it was “imperative that the two blast furnaces are kept at Scunthorpe to facilitate the transition to new technologies on site”.
“This is a priority for us as a union and is at the heart of the proposals we have presented to Jingye, and we are now awaiting the company’s response.”
British Steel declined to comment on the reasons why the Queen Anne furnace broke down, but said both of its furnaces were now working. He continued to buy “raw materials to support the production of iron and steel”.
The company, it added, remained in “ongoing discussions with the government about our decarbonisation plans and the future operations of our UK business”. Although progress continues, “no final decisions have been made,” it said.
