The UK steel industry has been in decline for several years now. Not only have British steel producers been undercut by China, which produces more than half the world’s steel, but increasing steel capability in rapidly developing nations like Brazil and India has sapped away demand from the global south.
The UK’s steel industry is historic however, one of the pillars of the global industrial revolution. To this day, steel remains fastened to the identities of the towns and cities that were once epicentres of steelmaking. A match between Sheffield’s two football teams – Sheffield United and Sheffield Wednesday – is still called the Steel City derby.
But an industry in decline is not necessarily an industry dwindling in importance; government officials working on plans to bail out Liberty Steel in the event of its collapse could attest to that.
The future of the steelmaker was thrown into doubt when its primary financer, Greensill Capital, filed for administration, risking thousands of British steelworkers’ jobs in the process. As the government mulls running the company with state funds until a buyer is found, and shadow business secretary Ed Miliband urges the government to consider nationalising Liberty Steel to save “crucial jobs”, the future of the UK steel industry looks to be at a crossroads.
A need for change
Demand for British-made steel fell roughly 45% in the first half of 2020, exacerbated by the effects of Covid-19 across the globe. In addition, the UK’s two blast furnace-based producers are both at key moments in their investment cycles, with decisions soon to be made on their future.
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With this in mind, think tank Common Wealth argues that “now is the time for ambition”, and has urged the UK Government to step up to secure a thriving future for UK steel by putting it on a pathway to net-zero.
Globally, steel production is responsible for 9% of greenhouse gas emissions. Of emissions from British industry in 2018, 15% were produced by the steel sector – equivalent to 11.5Mt of carbon dioxide.
In the UK’s Sixth Carbon Budget, recently published by the Committee on Climate Change, it was suggested that the government adopt a target for ore-based steelmaking to reach near-zero emissions by 2035 – the previous recommendation was a 95% reduction by 2040.
A green future?
In a project looking into means of greening the UK steel industry, Common Wealth said that the UK cannot deliver on its net-zero commitments without a credible plan to decarbonise steelmaking. It proposes a step-change in policy and investment, with a deliverable pathway to net-zero likely involving a combination of technologies – from replacing coking coal with hydrogen in blast furnaces to the use of carbon capture and storage, green energy supplies, and more.
“Green steel is the industry’s future,” Common Wealth director Mathew Lawrence says. “Accounting for almost a tenth of global emissions, and with steel products vital to the industries and infrastructures of the future, we need bold action.
“If the UK can put its steel sector on the pathway to low-carbon production, the benefits are multiple: retaining and growing a key industry that provides good work and high value outputs; strengthening the UK’s industrial supply chains; and reducing emissions.”
Common Wealth highlighted the importance of steel as a regional economic contributor. With the Conservative Party winning the 2019 General Election with a promise of “levelling up” the country, the government’s agenda may require nurturing the steel sector rather than abandoning it – especially in the wake of Covid-19.
Inaction isn’t an option
Common Wealth disputes alternatives for the future of the UK steel sector – one of which is allowing the existing blast furnaces to close and replacing them with electric arc furnaces for secondary production. This has been opposed by trade unions in the UK, with Community Union last year saying that moving away from blast furnace production would leave the sector unable to produce “a range of specialist steels”, in addition to causing job losses.
This proposal also fails to account for the fact that the UK would continue to need primary steel, and without domestic production this would need to be imported – producing more emissions per tonne than a domestic supply would in the first place.
Steel is a vital component across industries, not least forming a major component for wind turbines and other renewable energy technologies; global steel demand is forecast to increase more than a third by 2050 as green transitions ramp up. Rather than cutting carbon emissions by closing blast furnaces, the UK would simply be making them somebody else’s problem.
Despite this, electric arc furnaces remain the most viable alternative technology for steelmaking. Systems like direct electrolysis, where iron ore is turned directly into steel using electricity, is a long way from being commercially viable – and time is of the essence if the UK is to make strides towards its decarbonisation goals.
“Securing a green and thriving future for the steel industry requires bold action now,” says Lawrence. “That means investment in the technologies and processes that can decarbonise production, a critical role for trade unions in shaping a just transition, and an industrial strategy that provides support and demand for low-carbon steel in the coming decades.
“Unlike Germany and Sweden, which are racing toward a green future for the sector, we are still on the starting blocks; it is time the UK got serious and put green steel at the heart of its recovery agenda.”