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Britain’s steel industry is at a crossroads

Tata Steel recently announced plans to close both of the blast furnaces at Britain’s largest steelworks in Port Talbot. The blast furnaces, which make steel from iron ore, will be replaced with electric arc furnaces, which recycle steel from scrap metal. British Steel announced similar plans last year to replace Britain’s other two blast furnaces with electric arc furnaces. As a result, the United Kingdom (UK) will no longer have blast furnaces and the capabilities they offer to produce new or ‘virgin’ steel from iron ore. But does it matter? And what are the implications? 

Implications for Britain

The closure of blast furnaces at Port Talbot and Scunthorpe has several implications for Britain, the most important being the impact on:

History, jobs and communities: The UK was once the world’s largest producer of steel. The towers and chimneys of steelworks are central to Britain’s industrial heritage and to the identities of towns such as Scunthorpe and Port Talbot, which have employed generations of local workers. The closure of the blast furnaces at Port Talbot is expected to result in some 3,000 job losses, and the closure of blast furnaces in Scunthorpe will put 2,000 jobs at risk. 

Capability: The UK will be the first major economy without the capability to make virgin steel, which is made from imported iron ore and coal. Britain will instead rely on recycled steel, which is significantly more energy efficient and has a far lower carbon footprint. Production of steel through recycling requires about 10 times less energy than is required to produce steel from iron ore.

There are concerns that copper contamination in recycled steel means it is of lower quality and therefore unable to be used in applications such as car making and construction. However, electric arc furnaces are currently estimated to be able to produce about 90% of the grades of steel a blast furnace can. Scientists are working on ways to improve the quality of recycled steel, and the addition of an iron source, such as direct reduced iron, should allow the UK to produce the highest qualities of steel for demanding applications. As such, there are questions over whether steel needs to be produced from scratch in the first place.

National security and supply chains: As global tensions rise, countries around the world are trying to ensure that their industrial supply chains are more resilient. For example, Joe Biden, the United States (US) President, supported an investigation into the Japanese firm, Nippon Steel, for its bid to takeover US Steel, America’s third-largest steelmaker, even though Japan is an ally of the US. This was on the grounds of national security and ensuring supply chain reliability. 

Electric arc furnaces may increase the UK’s resilience by ensuring that Britain is no longer reliant on imports of iron ore and coal. It is estimated the UK’s self-sufficiency would increase from around 10% to about 75%, making Britain more resilient to geopolitical events and supply chain risks. It is estimated that 90% of the raw materials required to make virgin steel in the blast furnaces at Port Talbot are imported – from countries such as Japan, Brazil, and Australia. 

Climate impact: The UK is committed to reaching Net Zero by 2050, and the Climate Change Committee has recommended that by 2035, emissions from ore-based steelmaking be near zero. Electric arc furnaces are about 85% less carbon intensive than blast furnaces. However, if the UK still needs to import virgin steel, it may be exporting its carbon footprint to blast furnaces in other countries, which then have to transport that steel to the UK.

Replacement options

There are several options available to Britain. These include:

Blast furnaces: The advantage of current blast furnaces is that it is easier to produce clean steel using them, and they can be used to produce pig iron with a high carbon content, which can be desirable. However, they are expensive to run, are less efficient than alternatives, and have a high carbon footprint. As such, they are not a viable long-term option. 

Electric arc furnaces: Electric arc furnaces are far more energy efficient, as well as the quickest and most efficient way for the steel sector to significantly reduce emissions. It is estimated that for every tonne of steel produced in a blast furnace, 2,000 kilograms (kg) of carbon dioxide are emitted, whereas for a tonne of steel produced in an electric arc furnace, it is only about 150-200 kg.

Electric arc furnaces are less labour intensive and cheaper to run, and it is quicker to manufacture products using electric arc furnaces. The UK has an abundance of scrap metal, much of which is currently exported. This could instead be used in the domestic steel sector through recycling. Electric arc furnaces could potentially be supplied with entirely renewable energy sources in the future. However, the cost of electricity is currently an issue; UK steel producers pay more for electricity than countries such as France and Germany. 

Direct reduced iron plant: The replacement of the blast furnaces with electric arc furnaces may open up the possibility that a direct reduced iron plant could be added in Port Talbot. This would allow the UK to still produce the very highest quality steel. However, a direct reduced iron plant does not employ many people, so there would still be job losses and further government investment would be required. 

A long-term vision for UK steel will need to focus on electric arc furnaces. Whilst some pig-iron and direct reduced iron may need to be imported in the short-term, the UK can use this window to prepare for its own direct reduced iron plant and focus on increasing resilience to geopolitical events and supply chain risks.

Dr Mann Virdee is a Senior Research Fellow in Science, Technology, and Economics at the Council on Geostrategy.

Embedded image credit: Phil Beard (CC BY 2.0 cropped and overlaid)

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