British Steel starts consultation to close Scunthorpe BFs
British Steel says it will consult with workers and trade unions on the closure of its two blast furnaces, steelmaking operations and a reduction of steel rolling mill capacity in Scunthorpe, Kallanish learns.
It says challenging market conditions and significant ongoing financial losses have made it unsustainable to continue operating the blast furnaces and wider steelmaking operations.
It adds it will engage with ministers to seek options for support on transition to electric arc furnace steelmaking. However, this news comes the day after British Steel rejected a government funding offer, believed to be £500 million ($644m).
The steelmaker says following many months of negotiations, no agreement with government has been reached. As a result, the “difficult decision” has been made to begin a formal consultation with employees and unions from 27 March.
It adds that since 2020, British Steel owner Jingye has invested more than £1.2 billion to maintain operations amid ongoing production instability and significant financial losses of around £700,000 a day. Despite this, the blast furnaces and steelmaking operations are no longer financially sustainable due to highly challenging market conditions, the imposition of tariffs, and higher environmental costs relating to the production of high-emission steel.
The consultation will propose three options, including the closure of BFs, steelmaking operations and Scunthorpe rod mill by early June 2025, or BF and steelmaking operation closure in September. The third proposal is the BF and steelmaking operation closure at a future point beyond September.
British Steel chief executive Zengwei An says: “We understand this is an extremely difficult day for our staff, their families, and everyone associated with British Steel. But we believe this is a necessary decision given the hugely challenging circumstances the business faces.”
In its most recent financial report, the firm announced an eightfold increase in pre-tax losses, noting its ageing and high-cost assets. The company has experienced BF operational issues for some time, with losses growing yearly.
In a statement emailed to Kallanish, business and trade secretary Jonathan Reynolds says: “I know this will be a deeply worrying time for staff and, while this is British Steel’s decision, we will continue working tirelessly to reach an agreement with the company’s owners to secure its future and protect taxpayers’ money.”
He adds there is a bright future for UK steelmaking, given the government’s commitment of up to £2.5 billion to rebuild the sector, and the upcoming Plan for Steel.
The government has made clear that any offer of grant funding for the company must be the right deal for taxpayers. British Steel is said not to have met standard conditions guaranteeing respect for workers, support for the local area and ensuring the company’s long-term commercial viability.
UK Steel director general Gareth Stace called the move by British Steel a “gut punch to UK steelmaking” that will have “a profound impact felt throughout the British economy.”
“The end of steelmaking at British Steel would mean we have a major gap in capacity to meet the future demand of the nation and will be an irreparable break in the armour of national security,” he adds. “Government must get back to the negotiating table.”
UK industry minister Sarah Jones said later on Thursday that government hopes British Steel returns to negotiations, but it does not rule out nationalising the steelmaker (see separate story).
Carrie Bone UK
British Steel mulls building two electric arc furnaces at Scunthorpe site
British Steel is continuing its discussions with the UK government regarding the company’s decarbonization plans and the future operations of its UK business, a company spokesperson told S&P Global Commodity on Jan. 13.
While the company did not provide additional details, local media sources familiar with government discussions indicated that the initial plans, which envisioned building one electric arc furnace at Scunthorpe and another at Teesside, have been scrapped in favor of constructing the two furnaces at the Scunthorpe, north Lincolnshire site.
British Steel was nationalized in 2019 while the government sought buyers. It was subsequently sold to the Chinese steelmaker, The Jingye Group, which pledged a GBP1.25 billion ($1.55 billion) decarbonization plan. Under the proposed plan, the company was aiming to install two electric arc furnaces—one at its headquarters in Scunthorpe and the other at its manufacturing site in Teesside.
“While progress continues, no final decisions have been made,” the company spokesperson 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,” a spokesperson from the Department for Business and Trade said to S&P Global when reached for a comment on Jan. 13, underscoring the government’s commitment to preventing the end of steelmaking in the UK, with up to GBP2.5 billion of investment for the UK steel industry.
Currently, British Steel operates two furnaces: the Queen Anne Blast Furnace and the Queen Bess Furnace. The Queen Anne Blast Furnace was temporarily offline due to operational issues but resumed operations in late December.
British Steel’s plant in Scunthorpe is the only steelmaker in the UK that still produces crude steel after Tata Steel closed all its blast furnaces at Port Talbot in South Wales, securing Eur500 million in funds for its low-carbon transition to build its Electric Arc Furnace.
The company has been working with the government for months to secure funding for the relaunch of the site and to begin the transition from blast furnace production to electric arc furnace production, with the first EAF expected to become operational by late 2025. This would replace the 3 million mt/year blast furnaces responsible for the vast majority of the company’s CO2 emissions.
Platts, part of S&P Global Commodity Insights, assessed Hot Rolled Coil weekly (HRC) DDP West Midlands at GBP520/mt on Jan 9.
