British Steel withholds investment over UK policy obscurity

British Steel’s Chinese owners have allocated £1.2 billion ($1.68 billion) to invest into the UK steelworks’ blast furnaces, but are holding back the investment due to Boris Johnson’s ten-point net zero carbon economic plan. So says British Steel chief executive Ron Deelen in an interview with The Telegraph.

Part of the attraction for Jingye Group to acquire British Steel in March 2020 was the firms’ shared knowledge of blast furnaces, according to Deelen. “However, since they took over things have changed,” he is quoted as saying. “The climate committee has given clear advice to the Government – it’s not law yet, but probably will be by 2035 – saying they don’t want to see any blast furnace steel produced in the UK.”

The allocated funds will now probably have to be put towards electric arc furnaces. However, these use large amounts of electricity, which is considerably more expensive in the UK than in Germany and France, for example. UK Steel said earlier this month high electricity prices burden UK steelmakers with £54 million of additional annual costs compared to their German counterparts, thereby deterring investment to modernise the sector and slowing decarbonisation (see Kallanish passim).

Deelen says a clear direction from government ministers would help British Steel decide its investment plan. “The sooner we spend it, the better, because it will help us get to a sustainable cost level,” he observes. “What we are doing at the moment, I would call maintenance investments, £40m to £50m a year. We would like to start spending big money.”

The impact of Britain leaving the EU means all UK steel companies have been “extra punished” compared to other businesses, Deelen continues. UK steel going into the EU is now subject to the safeguard tariffs that once protected it. “One thing is for sure: we ended up with a Brexit agreement which says free trade, but doesn’t mean free trade for the steel industry,” Deelen says. He hopes the UK government will negotiate more favourable terms with Brussels.