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British Steel was forced to close one of its two blast furnaces at Scunthorpe last year after using the wrong kind of coal, in the latest sign of the crisis enveloping the Chinese-owned group’s UK operations.
The debacle triggered initial fears among some government officials that British Steel might be trying to sabotage its own lossmaking plant, but ministers have been reassured that the shutdown was down to a management blunder.
The disclosure came as it emerged that British Steel has abandoned plans to restore steelmaking to Teesside, as part of a government-backed restructuring of the company’s operations to move to greener forms of production.
Initial plans put forward by the company, which is owned by China’s Jingye, had envisaged building one electric arc furnace at Scunthorpe and one at Teesside, but people familiar with the situation confirmed the aim was now to build two at the Lincolnshire site.
Lord Ben Houchen, Conservative mayor of Tees Valley, claimed the Labour government had been opposed to the idea and favoured instead the concentration of new British Steel electric arc furnaces at its existing Scunthorpe plant.
“It’s disappointing,” Houchen told the Financial Times. “Clearly there has been collusion by the Labour government and unions for it not to come to Teesside.”
Allies of Jonathan Reynolds, business secretary, said the future structure of the business was a commercial decision for British Steel, but noted that Teesside was proving to be an attractive location for inward investment.
The company’s decision to drop plans to build one “green” furnace on Teesside and another at its main works in Scunthorpe was first reported by the Sunday Times.
The problems with British Steel’s “Queen Anne” furnace in Scunthorpe arose last year after the company began to import coking coal after closing the coke ovens that feed its two furnaces in 2023.
Engineers mistakenly sourced coke that was a mix of both “low-quality and low-condition”, and which led to the furnace becoming inactive, according to several people familiar with the situation.
The shutdown triggered initial concerns in government that British Steel might have tried to damage its own plant to justify the closure of its lossmaking UK operations, according to people briefed on the issue.
But one government insider said Reynolds believed it was down to “incompetence and cost-cutting” rather than any malign intention. The engineers misunderstood the complexities of the company’s demanding blast furnaces, said a second person familiar with the situation.
Talks between the government and the company on the scale of the support package for the restructuring of its operations remain ongoing. British Steel’s latest accounts, filed last year, showed that Jingye had injected £100mn of equity into the business in October 2023.
British Steel has made clear it is looking for more than the £500mn that was agreed for Tata Steel’s plant at Port Talbot in Wales to build one electric arc furnace. The government has said it will invest £3bn, including the £500mn for Tata, into Britain’s steel industry over the coming decade.
Union representatives said their priority was to keep the blast furnaces open for as long as possible. Electric arc furnaces are less carbon-intensive but also employ fewer people and the transition to greener forms of steelmaking could potentially put as many as half of the 4,500-strong workforce at risk.
Alasdair McDiarmid, assistant general secretary of the Community union, whose members include steelworkers, said it was “imperative that two blast furnaces are retained at Scunthorpe to facilitate the transition to new technologies on site”.
“This is a priority for us as a union and is at the heart of the proposals we have presented to Jingye, and we are now awaiting the company’s response.”
British Steel declined to comment on the reasons why the Queen Anne furnace went down but said both of its furnaces were now operating. It was continuing to purchase “raw materials to support iron and steel making”.
The company, it added, remained in “ongoing discussions with the government about our decarbonisation plans and the future operations of our UK business”. Although progress was continuing, “no final decisions have been made,” it said.