The owners of British Steel are to keep the blast furnaces at its Scunthorpe site running past Christmas amid talks over government support for a switch to less polluting technology.
The government is thought to be considering aid for British Steel at the same level or even higher than the £500m pledged to Tata Steel, which closed its two blast furnaces in Port Talbot in September. However, no decisions on the shape of a package have been made.
In the summer, the GMB union warned that British Steel was considering plans that could have resulted in the two blast furnaces in Scunthorpe closing before Christmas. However, it is understood the government and unions are increasingly confident that the company and its owner, Jingye Group, will not go ahead with that option, after progress in talks.
Steel companies around the world are struggling with a glut of production that has depressed prices. At the same time, the UK’s two big steelmakers – the Indian-owned Tata Steel and the Chinese-owned British Steel – are struggling to come up with the cash needed to switch production from polluting blast furnaces to cleaner electric arc furnace technology.
British Steel last year announced its plans to build an electric arc furnace at Scunthorpe, Lincolnshire, and another at a site in Teesside. However, it has held out for government support, which has been delayed to the frustration of workers.
Last week, the business secretary, Jonathan Reynolds, met Li Huiming, the chief executive of Jingye Group, to discuss the future of the Scunthorpe plant and its 2,500 workers, the Financial Times first reported.
It is understood the government is seeking assurances that jobs will be protected at Scunthorpe if an aid package is agreed, as well as seeking to make sure it will be financially sustainable.
The aid is likely to come from £2.5bn set aside by the government to help steelmakers decarbonise. However, it is thought that British Steel will only be eligible for a relatively small proportion of that figure, and much less than the £2bn left over after the aid for Tata.
One source of uncertainty over the future of the Scunthorpe blast furnaces has been orders of coking coal used to strip oxygen from iron ore. British Steel closed its coke ovens last year, and has since been reliant on imports via its port at Immingham.
The steelmaker has been contending with a problem in one of its blast furnaces that led to the temperature dropping. It subsequently ordered less coking coal as a cost-saving measure while dealing with the problem.
The company is understood to have suggested in talks that it may not increase orders of the coal again, but it is thought that threat has now receded.
Another UK-based steel business, Liberty Steel, has announced it will pursue a restructuring of the debts of its Speciality Steel UK (SSUK) business to try to ease the burden of repayments. However, the company, which is controlled by the metals magnate Sanjeev Gupta, said no employees would be affected by the restructuring.
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Jeff Kabel, Liberty’s Steel group chief transformation officer, said on Monday that the company had the backing of customers for the plan. He said it was the “best route forward for all stakeholders”, adding: “We’re confident in winning the support of our creditors for the essential actions required to complete SSUK’s recovery.”
Liberty said SSUK was still struggling to cope with payments on borrowing from Greensill Capital, a lender that went bust after lending £400m. Financing arrangements between the Gupta Family Group Alliance and Greensill have been subject to an investigation by the UK’s Serious Fraud Office since 2021.
It is thought that Liberty will seek an adjournment to separate proceedings by creditors pending the outcome of the restructuring plan.
A British Steel spokesperson said: “As part of our commitment to securing a sustainable future for British Steel in Scunthorpe, we recently purchased raw materials that will see our operations continue to run into the new year and are working to restore production levels from our blast furnaces.
“At the same time, we remain in active discussions with government, working together to ensure British Steel continues to play a vital role in meeting the UK’s infrastructure needs.”
A government spokesperson said: “This government will simply not allow the end of steel making in the UK. That’s why we’ve committed up to £2.5bn of investment to rebuild the UK steel industry and support communities now and for generations to come.”