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ALEX BRUMMER: Britain’s sprint to Net Zero has dealt another devastating blow to the nation’s beleaguered steel industry

Britain’s sprint to net zero has dealt another hammer blow to the nation’s swiftly vanishing steel industry.

The loss of up to 2,000 jobs at British Steel’s plant in Scunthorpe in north Lincolnshire will have a devastating effect on the local economy.

Worse still, it will leave the UK more reliant on steel imports, as the transition from coke-burning blast furnaces to more energy-efficient electronic arc furnaces means that it will no longer be able to produce ‘virgin steel’, made from smelting iron ore.

While the steel made from electric arc furnaces, which recycle scrap metal, is perfectly acceptable for car manufacture, construction and – with modern technology and additives – the railway industry, higher grade virgin steel is vital to the defence sector, where it is used in the manufacture of ships, submarines and tanks.

And Scunthorpe is not the only steel plant facing cuts. An announcement of a similar green transformation, costing several thousand jobs, is shortly expected at Port Talbot in South Wales.

The loss of up to 2,000 jobs at British Steel’s plant in Scunthorpe in north Lincolnshire will have a devastating effect on the local economy, writes ALEX BRUMMER The loss of up to 2,000 jobs at British Steel’s plant in Scunthorpe in north Lincolnshire will have a devastating effect on the local economy, writes ALEX BRUMMER

The loss of up to 2,000 jobs at British Steel’s plant in Scunthorpe in north Lincolnshire will have a devastating effect on the local economy, writes ALEX BRUMMER

Decisions to close blast furnaces in the UK are disturbingly being made far away in Mumbai and Beijing Decisions to close blast furnaces in the UK are disturbingly being made far away in Mumbai and Beijing

Decisions to close blast furnaces in the UK are disturbingly being made far away in Mumbai and Beijing

Disturbingly, decisions that will end traditional steel-making in the UK are being made not at home but far away in Mumbai and Beijing.

The Port Talbot plant is owned by India’s Tata Steel, and, in spite of its name, British Steel is owned by China’s Jingye Group, which rescued it from closure four years ago with the promise of £1billion of new investment over the next decade.

But Rishi Sunak’s government and its successors will be picking up a share of the bill following the commitment of £300million of taxpayers’ money as part of Britain’s investment in combating climate change.

Meanwhile, Business Secretary Kemi Badenoch has pledged £500million to support the replacement of blast furnaces with electric arc technology at Port Talbot, which has been labelled the most polluting plant in Britain, with the iron and steel industry in Wales responsible for a fifth of UK industrial emissions. These developments are only the latest setback for UK steelmaking, which has been in steady decline since the 1970s when it employed 320,000 people, 20,000 of whom were in Wales.

A flood of cheap imports, particularly from China, has hastened the shrinkage. The US’s decision to impose steep tariffs on steel imports – on the grounds it was a strategic industry – only made things worse, with Beijing switching its attention to Britain and other continental markets.

The Government’s backing for Tata is understandable given that it is among the biggest inward investors in the UK through its ownership of upmarket car-maker Jaguar Land Rover.

Tata recently committed to building a £4billion giant battery plant in Somerset despite a determined bid by Spain to hijack the project.

Britain's steel industry has shrunk thanks to a flood of cheap exports, particularly from China coupled with the US's decision to impose tariffs on imports Britain's steel industry has shrunk thanks to a flood of cheap exports, particularly from China coupled with the US's decision to impose tariffs on imports

Britain’s steel industry has shrunk thanks to a flood of cheap exports, particularly from China coupled with the US’s decision to impose tariffs on imports

Supporting a Chinese-owned firm could be problematic for the Government in the event of political upheaval causing a spike in the price of commodities, as has happened following the Russian invasion of Ukraine Supporting a Chinese-owned firm could be problematic for the Government in the event of political upheaval causing a spike in the price of commodities, as has happened following the Russian invasion of Ukraine

Supporting a Chinese-owned firm could be problematic for the Government in the event of political upheaval causing a spike in the price of commodities, as has happened following the Russian invasion of Ukraine

However, supporting a Chinese-owned steel maker, at a time when relations between London and Beijing are strained, will be much more politically problematic for the Government.

There has also never been a worse time for the UK to give up on its strategically important steel output, as it will be needed in increasing quantities to support the nation’s booming defence industries and investment in new nuclear plants necessary for the nation’s energy security.

As we have seen following Russia’s invasion of Ukraine, geopolitical upheaval can cause the price of vital commodities to rocket as supply chains are interrupted.

And so cutting output now appears short-sighted in the extreme – even if it does mean hitting carbon reduction targets more quickly.

ChinaBeijing

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