UK govt details plan to support steel as Brexit looms

The UK government plans to step up support to the country’s steel industry, via procurement of steel for new infrastructure projects, identification of domestic market “opportunities” worth GDP 3.8 billion ($4.6 billion) annually, and helping businesses with high energy use to cut their bills, according to a statement from the Department of Business, Energy & Industrial Strategy (BEIS) sent to S&P Global Platts Thursday.

BEIS’s research shows that “significant opportunities exist in this sector, with domestic market opportunities for the UK steel sector that could be worth an additional £3.8 billion per year by 2030,” a Department spokesman said in response to questions posed to new Prime Minister Boris Johnson on his strategy for steel. Many industrialists have expressed concerns that a UK exit from the European Union without a deal could be harmful for the country’s steel sector as tariffs may be imposed on its sales to the EU, its main export customer.

BEIS has recently updated its so-called Steel Pipeline, signalling upcoming steel requirements for national infrastructure projects, the statement said. “This shows how the government plans to procure around three million tonnes of steel, worth around £0.5bn, over the next decade for infrastructure projects such as the construction of Hinkley Point C and the maintenance and upgrading of the UK’s motorway network,” it said.

The UK currently produces 7.9 million mt/year of steel, of which 4.4 million mt are sold domestically and 3.5 million mt are exported, of which nearly two thirds goes to Europe, according to trade association UK Steel. In addition, 3 million mt/year of steel products worth around GBP530 million are imported for use in the construction industry. 
A UK Steel Procurement Charter was drawn up in May, of which BEIS is a signatory. The idea is that government and other authorities should pledge to buy domestically-produced steel for new projects, in a move to help the sector increase its sales. Last month Heathrow Airport became the Charter’s first private-sector signatory.

For the first time this year BEIS has published information from departments and their arm’s-length bodies on how much steel they have procured over the last financial year and how they have applied the steel procurement guidance, including taking into account wider social and environmental benefits when procuring and designing major projects,it said.

“The Government is committed to supporting a sustainable UK steel industry that is productive, innovative and highly-skilled and we’re working with industry, unions and devolved administrations to achieve this,” the spokesman said.

Energy fund

In the most recent UK Budget, the Chancellor announced an Industrial Energy Transformation Fund backed by up to GBP315 million of investment, to help businesses with high energy use to cut their bills and transition UK industry to a low carbon future, the BEIS statement continued.

“We have provided more than £305 million in compensation to the steel sector since 2013 to make energy costs more competitive including over £53 million during 2018,” it said.

According to UK Steel, the UK’s electricity prices for large industrial energy users are higher than in any EU country. “In 2018/19 UK steel producers paid 51% more than German producers and 110% more than French producers, even after the compensation and exemption schemes already provided by the government. This amounts to a GBP55 million/year additional expense for the UK steel sector,” the trade association said in a recent paper.

The steel industry will need to face up to Brexit in any case, BEIS warned.

“The UK will be leaving the EU on 31 October whatever the circumstances. We would prefer to leave with a deal, and we will work in an energetic and determined way to get that better deal,” the BEIS spokesman said in the statement..

The spokesman declined to comment on the situation of British Steel which entered compulsory liquidation May 22. British Steel is the second largest UK-based steelmaker, with 3 million mt annual capacity in the UK and Europe.

— Diana Kinch