The grant, which was formally signed on Wednesday September 11, was obtained under the former Conservative administration, but details are yet to be finalized and remain subject to negotiations with the new Labor government.
The investment is part a Tata Steel’s £1.25 billion plan overhaul the Port Talbot facility. The company will invest additional £750 million.
“The new assets will reduce the UK’s entire industrial carbon emissions by 8% (and Port Talbot’s by 90%) while setting a benchmark in circularity, utilizing UK scrap,” Tata Steel said in its announcement.
Tata Steel Europe’s decarbonization plan for the Port Talbot steelworks includes the construction of a new electric-arc furnace (EAF) with 3.2 million tonnes per year capacity — which is expected to come online in 2027 — replacing two blast furnaces (BFs) with total capacity of 5 million tpy of crude steel.
A spokesperson for Tata Steel, however, told Fastmarkets previously that the capacity of the new EAF was comparable to the current hot metal output from Port Talbot.
BF4 will be decommissioned by the end of September 2024 and BF5 was decommissioned in June.
The company has already launched a public consultation on specific activities and is working closely with the authorities to apply for planning approvals by November 2024.
“The supply chain arrangements [are] in place to serve customers through the transition period until the EAF is commissioned,” Tata steel said,
Market sources told Fastmarkets they expect the company to use imported slab and slab produced at its own assets in the Netherlands to feed the hot-strip mill in Port Talbot.
UK steel industry to become more energy-intensive
In the past year, two key UK steelmakers, British Steel in England and Tata Steel in Wales, announced ambitious plans to replace their old BF-basic oxygen furnace-based steelmaking capacities with EAFs.
EAFs could be a strong alternative to the prevailing integrated steelmaking business model in the UK given the country’s large surplus of steel scrap and the lack of domestic consumers for such material, Fastmarkets understands.
But industry sources see high energy prices as a threatening factor that could undermine British steelmakers’ competitiveness.
Sources said that the share of electricity costs in EAF-based steelmaking is about 15-20%, while for the BF-BOF route it is only about 4%.
“To meet these [decarbonization] ambitions, the next step on the path to growth will be government action to deliver affordable electricity prices. UK Steel’s analysis, released this September, found that UK steel producers pay up to 50% more than competitors in France and Germany, adding £37 million to the UK steel sector costs. With a switch to more EAFs, it is expected that the sector’s electricity consumption will roughly double,” UK Steel, the trade association for the country’s steel industry, said in a statement seen by Fastmarkets.
For example, in 2023, the average non-household electricity price paid by UK steelmakers was about £113 per MWh. In Germany and France, the corresponding price was around £61 per MWh.
“To ensure that their significant investment yields returns for our nation, the [UK] government must now also deliver the right business environment. Steel businesses need competitive electricity prices, access to good quality steel scrap and fair competition from international trade,” UK Steel director general Gareth Stace said.
UK steel sector in figures
The latest UK Steel report shows that UK steel production hit a new low of 5.6 million tonnes in 2023, down from 6.1 million tonnes in 2022.
UK production in 2022 had already reached the lowest level since the Great Depression, but it dropped further by 6% in 2023.
Primary steelmaking in the UK is represented by British Steel, Tata Steel and Celsa.
British Steel has installed capacity of 4.3 million tonnes per year of pig iron and four BFs at its ironmaking site in Scunthorpe, in northeast England. The company produces sections, wire rod, rail, beam and plate. Of the four BFs at the site, only two are still operational, according to industry sources.
British Steel also plans to switch to EAFs by 2025.
Tata Steel’s Port Talbot produces hot-rolled and cold-rolled coil, as well as tubes.
Celsa Group in Cardiff, also in south Wales, has two EAFs with total capacity of 1.2 million tpy. The company focuses on long steel production.
Published by: Julia Bolotova
