Pushing for primary steel is a distraction in rebuilding the UK’s steel industry – Inside track

This blog is by William Carr, policy analyst at Green Alliance. 

The past year has been turbulent for the steel industry, Port Talbot, now Scunthorpe. The tightrope of jobs, modernisation, global competition, trade tariffs and cutting emissions hasn’t been an easy one to walk. A lack of a long term transition strategy from a succession of governments hasn’t helped, putting steel workers and their communities at risk.

Primary steel has been at the forefront of this argument. The threat of the UK being the “only country in the G7 unable to make steel from scratch” has reached audiences far and wide. But what is primary steel? And how important is it to the UK’s steel industry’s future?

Primary steel is typically made using a blast furnace, from iron ore and coking coal. The process makes a low contaminant steel used for the widest range of applications. Blast furnaces operated in Port Talbot before the last one closed in September 2024 and are still going in Scunthorpe, though these recently came close to closure, requiring emergency government intervention to protect jobs.

UK blast furnaces need to be replaced Both sites are expected to move to an electrified steelmaking process, using electric arc furnaces (EAFs). The UK’s blast furnaces are old, in a state of disrepair, and are huge emitters of greenhouse gases. These two sites were the UK’s second and fourth highest single point emitters in 2023, and also cause considerable air pollution affecting local communities. EAFs are cleaner and cut greenhouse gas emissions by half if run on green electricity.

One issue with EAFs is that, on their own, they can’t make primary steel, they need a supply of iron from another source. Instead, their main input is recycled scrap steel, a resource the UK has in abundance. Copper and other contaminants in recycled steel can mean fresh iron input is still needed for certain steel grades. EAFs can produce 90 per cent of the steel grades that a blast furnace can, and innovation is happening fast. Sheffield Forgemasters is already using an EAF to manufacture defence grade steel and most of the UK’s current needs can be met with recycled steel.

Whether or not the UK makes primary steel isn’t the main issue. Ultimately, the country needs a competitive industry that provides a secure supply of steel needed and good jobs for the skilled workers in communities already built up around the industry. Installing EAFs is central to this, but we must get the transition right.

The UK industry will need some low emission iron in future Meeting our steel needs means securing a source of low emission iron for those few, higher grade steel applications, like automotive sheet steel, where some fresh iron is needed in the mix. Some EU countries have been moving forward on this, building ‘direct reduction’ ironmaking (DRI) facilities fuelled by natural gas with a plan to switch to green hydrogen, made using renewable electricity, when it becomes more affordable.

There have been calls for the UK to do the same. But switching to green hydrogen takes a lot of renewable energy, it would be more than what’s needed to power Birmingham. Looking forward to 2035, our recent analysis suggests that making the iron we need here in the UK, using green hydrogen, will be significantly more expensive then importing it, at least £160 million a year more, realistically closer to £280 million a year. This is down to the difference in electricity prices between the UK and future exporting countries like Brazil and Canada. This is a high price for the UK to pay to retain primary steelmaking.

On security concerns, these countries already supply us with iron ore, through carefully chosen trade partnerships, importing already processed iron shouldn’t pose significantly more risk. Security of supply can also be achieved through a flexible, diversified approach. We recommend a new government innovation fund supports the exploration of ironmaking for domestic production while also pursuing trade agreements with potential iron exporters. Starting now would allow time to develop a balanced approach in future.

A wider strategy is needed to retain jobs Ensuring fairness to workers and communities throughout this transition means a step change from the government’s previous approaches in the upcoming steel strategy. Insufficient forward planning and not including workers or communities in the process have exacerbated problems. In Scunthorpe, the transition should keep one or both blast furnaces open, while the EAF is being built, to maintain jobs and retain relationships with existing customers. There are no emissions implications here as closing the blast furnace first would mean steel would simply be imported from European blast furnaces instead.

But, as EAFs need fewer workers, a wider strategy is needed. Ironmaking in the UK would only provide around 200 jobs, which would not compensate for the 2,000 lost at Port Talbot, or the 2,000 that were at risk at Scunthorpe. But there is a lot of potential for good jobs in sorting scrap steel and downstream steel processing into high value products. In Germany, steel processing accounts for 85 per cent of the jobs in the industry. This could be expanded in steel making areas, keeping steel jobs in the communities.

By 2050, the UK will need an estimated £21 billion worth of steel to build offshore wind turbines, yet less than two per cent of steel used in recent projects was made or processed here. The steel strategy presents a once in a generation chance to futureproof the sector and ensure it can meet more of the UK’s needs. The opportunities are there, we just need to seize them.