The companies running Britain’s four remaining steel blastfurnaces have been offered £600m in government support to invest in lower-emissions technology.
The chancellor, Jeremy Hunt, is expected to confirm the help of £300m each for British Steel and Tata Steel in an announcement as soon as this week, although the timing will depend on them accepting the offers. The BBC first reported the government offer to both companies.
The steel industry is one of the most difficult to decarbonise because of the huge energy requirements and the use of coking coal in iron smelting, a process which emits carbon dioxide directly.
British Steel, owned by China’s Jingye, and Indian-owned Tata Steel are both looking at how to upgrade their plants to electric arc furnaces, which heat recycled metal using electricity that can in theory come from zero-emissions sources.
The British Steel and Tata plants employ thousands of workers with two furnaces each at Scunthorpe in Lincolnshire and Port Talbot in south Wales respectively.
British Steel has been in talks with the government over support since the autumn to help it with the increased costs of carbon credits as well as much higher energy prices after Russia’s full invasion of Ukraine 11 months ago. Tata, meanwhile, has been in talks over the longer-term future of the Port Talbot site for several years.
It is understood any government support would be conditional on the companies also committing to investing in the plants themselves, and will be tied to environmental investments in order to comply with state aid rules.
The Tata Group chairman, Natarajan Chandrasekaran, said last summer that Port Talbot would require £3bn – including £1.5bn from the government – to keep the site operational.
Industry sources question whether that much would be required to upgrade two blastfurnaces, although £300m would probably only cover the costs of upgrading one.
British Steel is also thought to be looking at the possibility of carbon capture and storage for one of the blastfurnaces as Scunthorpe, a method of emissions reduction that would retain the UK’s ability to continue primary steel production rather than relying on recycled scrap.
The steel industry has been demanding support to decarbonise for several years. Labour has committed to spending £3bn to upgrade the industry.
Charlotte Brumpton-Childs, a national officer for GMB, one of the unions representing steelworkers, said: “Any investment in the UK’s beleaguered steel industry is welcome.
“But ultimately this is a sticking plaster – it does nothing to address the wider issues in the industry: catastrophic energy costs and a grossly uneven international trading environment.”