Business secretary backs shift to electric arc furnaces at British Steel plant | British Steel

Business Secretary Peter Kyle’s support for a switch to cleaner electric arc technology at the state-controlled British Steel site has raised questions about the future of the UK’s last remaining blast furnaces.

Kyle said the government “wants to see this transition happen” as it works on a new steel strategy expected to be published in December.

A switch to electric arc furnaces at Scunthorpe, Lincolnshire, will secure the future of steelmaking at the site, which has been under emergency control since April, as the UK looks to meet its target of net zero carbon emissions.

But it would also raise doubts about the fate of blast furnaces, which employ thousands of people, and about the UK government’s previous promises to protect steelmaking from iron ore, Britain’s primary steelmaking capability.

When the government recalled parliament to take control of British Steel in April, it feared that the mill’s Chinese owner, Jingye Steel, planned to close it permanently, leading to the loss of up to 2,700 jobs. Ministers are yet to outline plans for Scunthorpe’s long-term future.

The government earmarked £2.5bn for the steel sector in last year’s election manifesto, but Kyle confirmed it had spent hundreds of millions of pounds of that money to keep operations of British Steel and Liberty Steel, another producer that collapsed into bankruptcy in August.

Kyle said the government had to change its plans as the global steel industry faced a series of crises.

“The UK operates in a very complex global environment, which of course includes the impact of tariffs but also the impact of oversupply,” he said. As Donald Trump causes chaos with trade tariffs, large amounts of steel continue to flood global markets from China as he searches for other markets.

Using money earmarked for the steel industry would likely mean less money for capital investment. However, when asked if there were electric arc furnaces in Scunthorpe, Kyle replied: “I’m considering it.” He said the government would give more details on its steel strategy.

Steelworkers will be wary of the plans following Tata Steel’s switch to electric arc furnaces, which cut 2,500 jobs at Port Talbot in south Wales last year. The plan also called for making a deal with Jingye, who was still the legal owner, to walk away.

The move away from blast furnaces will also raise questions about the UK’s ability to produce virgin steel. Kyle’s predecessor as business minister, Jonathan Reynolds, has repeatedly said the government took control of the Scunthorpe mill to protect its “primary steel production”, i.e. its ability to produce steel from iron ore.

Alasdair McDiarmid, deputy general secretary of the Community, a union representing steelworkers, said he welcomed “the government’s firm commitment to a just transition”.

But he added that it would be important to “maintain primary steelmaking capacity in the UK”.

The UK relies on blast furnaces to produce primary steel, but these often release large amounts of carbon dioxide into the atmosphere. Electric arc furnaces, by contrast, use electricity to melt scrap steel, not iron ore.

The government is considering investing in a separate plant to convert iron ore into direct reduced iron (DRI) compatible with electric arc furnaces. This DRI can then be produced using clean hydrogen, achieving much lower carbon emissions while preserving primary steelmaking capability. However, industry sources cast doubt on the financial viability of such an arrangement.

Frank Aaskov, energy and climate change policy director at lobby group UK Steel, said it was “encouraging to see the secretary of state set out a clear future vision for the UK steel industry and British Steel”.

He said the steel industry needed “a stronger business environment through lower energy prices and sound trade policies.”

Kyle spoke to the Guardian from Cardiff, where he met with small businesses to hear about productivity improvements using digital technology. He said the government wanted to play a “bigger role” in coordinating AI training for companies.