A British Steel blunder forced Scunthorpe to close the furnace

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British Steel was forced to close one of its two blast furnaces in Scunthorpe last year after using the wrong type of coal, in the latest sign of a crisis that has engulfed the operation. of the Chinese group in the UK.

The dispute sparked initial fears among some government officials that British Steel might be trying to close down its damaged plant, but ministers have since been assured that the closure was due to a management error.

The announcement comes as it emerged that British Steel has abandoned plans to bring steelmaking back to Teesside, as part of government-sponsored organization of the company’s operations to move to greener production methods.

The first plans presented by the company, which is owned by China’s Jingye, were to build​​​​​​​​one electric furnace in Scunthorpe and one in Teesside, but people familiar with the situation confirmed that the intention was to build two in Lincolnshire.

Lord Ben Houchen, the Conservative mayor of Tees Valley, said the Labor government was opposed to the idea and favored the installation of new British Steel mills at its existing Scunthorpe plant.

“It’s disappointing,” Houchen told the Financial Times. “It’s clear that there has been collusion with the Labor government and the unions to keep it from coming to Teesside.”

Alliance Jonathan Reynolds, business secretary, said the future structure of the business was a business decision for British Steel, but noted that Teesside is proving to be an attractive location for inward investment.

The company’s decision to abandon plans to build a “green” kiln on Teesside and another at its main works in Scunthorpe was first reported by the Sunday Times.

Problems at British Steel’s Queen Anne furnace in Scunthorpe emerged last year after the company began buying coking coal after shutting down the coke ovens that feed its two furnaces in 2023.

Engineers mistakenly received coke that was a mixture of “low and low quality”, which caused the furnace to malfunction, according to several people familiar with the situation. .

The closure sparked initial concerns in the government that British Steel might try to destroy its plant to justify closing its loss-making UK operations, according to people briefed on the matter.

But one government insider said Reynolds believed it was “ignorance and cost-cutting” rather than any nefarious intent. Engineers did not understand the complexity of the company’s nearly explosive vision, said a second person familiar with the situation.

Negotiations between the government and the company regarding the scale of the support package for the adjustment of its operations are ongoing. British Steel’s latest reports, filed last year, showed that Jingye had invested £100mn of equity in the business by October 2023.

British Steel has made it clear that it wants more than the £500mn that was agreed for Tata Steel’s Port Talbot plant in Wales to build a single electric arc furnace. The government has said it will invest £3bn, including £500mn for Tatain the British steel industry over the next decade.

Union representatives say their priority is to keep the blast furnaces open for as long as possible. Electric furnaces are less carbon intensive but also employ fewer people and a shift to greener steelmaking could put half of the 4,500 workers at risk.

Alasdair McDiarmid, deputy general secretary of the National union, whose members include steelworkers, said “it is important to keep the two blast furnaces in Scunthorpe to facilitate the transition to new technologies on the site”. .

“This is our priority as a trade union and is at the heart of the proposals we 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 operational. It was continuing to buy “raw materials to support iron and steel making”.

The company, it added, remains in “ongoing discussions with the government regarding our decarbonisation plans and the future operation of our UK business”. Although progress was ongoing, “no final decisions have been made,” it said.