The UK government presented its new Steel Strategy on March 19 setting an ambition for up to 50% of steel used in the UK to be made in the country, boosting production from its current 30% market share.
The new strategy was welcomed by trade body UK Steel, which said the government had been “incredibly bold in its approach to trade”, but it added that the sector still needs more competitive energy prices, an effective carbon border policy and stronger public procurement rules.
With its landmark strategy, the UK is introducing trade measures to preserve domestic steel production for critical national energy security, defense and transport infrastructure. From July 1, overall quota levels for steel imports will be reduced by 60% compared to current arrangements, and steel coming into the UK above these levels will be subject to a 50% tariff.
The government is considering a transitional arrangement under which the new tariff would not apply to goods under contracts agreed before March 14 and imported between July 1 and Sept. 30, 2026.
The government will also be raising the UK’s maximum Most Favoured Nation steel tariffs at the WTO to 50% to protect the domestic industry from global overcapacity in the long run. For the same reason, it will consider introducing requirements to identify where steel imports are melted and poured.
The new strategy also commits to electric arc furnaces as the future of British steelmaking, continuing the shift from blast furnaces to EAF-based production, and enabling offshore wind developers to include steel manufacturers in the next round of Clean Industry Bonus applications launching this year to maximize UK steel use in renewables.
The National Wealth Fund will be the government’s main mechanism for providing up to GBP2.5 billion ($3.3 billion) for investment in the steel sector, which already includes a deal backed by UK Export Finance worth GBP70 million, for British Steel to supply the refurbishment of Nigerian ports.
“With this strategy we are closing the decades-long chapter of destructive de-industrialization and committing instead to strengthening and sustaining Britain as a steel-making nation,” said UK Business and Trade Secretary Peter Kyle.
The strategy builds on the support the government has already put in place for the steel industry since taking office, including cutting electricity costs for producers via the “Supercharger”, reforming procurement rules to ensure more UK-made steel is considered for public projects, and speeding up grid access for new investment projects.
Since the government’s intervention at Scunthorpe last year, British Steel has made further progress, including hiring new apprentices and signing significant contracts, such as a contract to supply a Turkish rail project worth tens of millions.
Other government support for the UK’s steel sector since taking office has included GBP500 million for the construction of a new EAF at Port Talbot, and the funding to run a sales process for Speciality Steel UK.
Game changer
UK Steel welcomed the Steel Strategy, calling it a game-changer.
“The government’s bravery in taking the required measures represents a real shift in the culture of Westminster from protecting the ideology of free trade at any cost, to defending critical industries and national security,” the trade body’s director general Gareth Stace said in a March 19 statement.
The association praised the headline cuts to import quotas, saying they go even further than similar measures taken in the US, Canada and EU, and make clear that the government recognizes the distortions that overcapacity and extreme subsidy have created in global steel markets, and that the UK must domesticate more of its steel supply, especially in areas such as defense, grid infrastructure and civil nuclear.
Domestic steelmakers have seen their share of UK steel demand slump to just 30% as a result of continuous subsidized steel flows into international markets, according to UK Steel.
However, while the progress made to support the sector is encouraging, significant challenges remain, it warned, pointing to unresolved carbon border policy, still uncompetitive industrial energy prices, and somewhat loose public procurement policy.
According to the association, UK steelmakers face industrial electricity prices 14% higher than in Germany and 25% higher than in France. While the government increased compensation for electricity network charges in its Industrial Strategy, the Steel Strategy does not contain any new initiatives to deliver competitive industrial power prices.
“Despite this government’s progress on shielding steelmakers from network costs in electricity bills, the strategy fails to address the need for action on wholesale power prices,” said Frank Aaskov, director of energy and climate change policy for UK Steel. “That omission leaves the final piece of the competitiveness jigsaw firmly missing.”
UK Steel also warned that the UK CBAM risks making importing Chinese steel cheaper than producing lower-emission steel locally. The policy also covers a narrow range of products, so importers can avoid the UK CBAM by switching to finished or semi-finished steel-containing goods not included in its scope.
Finally, the increased carbon costs will make UK steelmakers uncompetitive in non-EU markets, without an export solution. Instead of creating a fair market, the policy, due to the remaining loopholes, risks favoring imports over domestic production.
“Without a change in direction… the policy risks achieving precisely the opposite of its stated aim,” Aaskov said, adding that the steel industry is ready to work with the government to address both CBAM and industrial energy pricing issues.
