Thousands of jobs are threatened at a Scunthorpe steel foundry, highlighting the need for a just transition
The UK steel industry is back in the news again, with impending decisions by British Steel and Tata to lay off thousands of workers as the companies transition to greener production methods.
The hollowing out of UK manufacturing is a familiar story that has left behind a legacy of mistrust in former industrial areas.
There is a risk that the same mistakes are repeated after the announcement that up to 2,000 jobs are at risk at British Steel’s Scunthorpe furnace, this time with “net zero” framed as the villain.
But it does not have to be this way.
Decarbonising the UK steel industry is a formidable challenge. The sector is a significant contributor to the nation’s greenhouse gas emissions — accounting for 2.5% of all the UK’s emissions. Reducing this is crucial for meeting our net zero targets.
However, the transition to low-emission technologies is fraught with risks, including high costs, potential job losses, and the threat of international competition.
Consider British Steel’s strategy of converting their blast furnaces to Electric Arc Furnaces (EAFs) that use electricity instead of coal and convert scrap and recycled metal into steel.
For a private firm like British Steel the logic of the decision to close the Scunthorpe plant makes sense. There is rising demand for green steel from sectors such as electric vehicle manufacturers alongside an opportunity to reuse scrap steel which the UK generates a lot of. EAFs are more affordable compared to other alternatives and are often more efficient. They also reduce emissions by 75% compared to traditional methods and are expected to improve in performance as we decarbonise electricity.
However, we cannot allow the decision of one private firm to determine the future of green steel in the UK. Political parties of different hues have committed to supporting the industry and its workers, but that will require a comprehensive industrial strategy, not one off payments to support specific projects.
Nearly £1 billion of public money has been pledged to support companies like British Steel and Tata but this should come with clear conditions such as no-net job losses, worker training and investment in local supply chains where applicable.
“In the longer term, however, we need to support growth in the steel industry through publicly owned steel production.”
This isn’t a pipedream when one considers the UK is already on course to develop large amounts of renewable energy — and consequently green hydrogen — two critical components that form the basis of making more steel through techniques like Direct Reduced Iron (DRI) using hydrogen.
Sweden, Germany, the US and parts of Asia are investing billions in developing these techniques that will secure the long term future of their steel industries and workforces. US President Biden’s Inflation Reduction Act is also turbocharging investment in green steel through highly attractive incentives for hydrogen production. The UK should be doing the same.
To protect steel jobs in the short term, some in the union movement have advocated for a transition to grey hydrogen as a bridge to cleaner, long term alternatives. This would be a mistake. Green hydrogen will be cheaper than grey in the US as early as 2024 and by 2028 in the EU. If the UK is to stake its claim to a growing green steel market, temporary transitions using natural gas will only lock us into higher costs and more emissions.
A particular problem for the steel industry over the past decade or so has been the scale of cheap imports, primarily from China. The EU has recently adopted its carbon border tax to prevent the risk of carbon leakage and protect its domestic industries from cheap imports. While the effects of the scheme are yet to kick in, it is expected that imports from China and India will be hit hardest while cleaner alternatives from Japan and South Korea will benefit. The UK has ambitions to be a significant exporter of green steel and Europe is a lucrative market. This is a great opportunity for us to steal a march on other countries.
As the steel industry evolves, so too must the workforce. A recent report by the Leeds university business school highlighted the need for a comprehensive approach to supporting steelworkers. This includes re-skilling and up-skilling to ensure that workers can operate new technologies and adapt to new roles. Workers are optimistic about the green transition, seeing it as an opportunity for job security and industry competitiveness. Yet, they are also aware of the potential impacts on their jobs and express a need for training to improve job satisfaction and safety.
The UK has so far taken modest steps in bolstering the steel industry through its £250 million Clean Steel Fund and the Industrial Energy Transformation Fund but a large part of it is yet to be disbursed. Investing in research, development and deployment will be a crucial part of helping nascent industries such as hydrogen, to grow rapidly and provide for its many essential use cases to accelerate the UK’s decarbonisation.
Decarbonising the UK steel industry is a complex task but emphasis on technological transitions should be equally matched with an effort to ensure a just transition. With the right support, the UK steel industry can become a leader in sustainable production with a robust workforce.
