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The UK’s annual haul of scrap steel would cover Hyde Park to a depth of six metres. As more metal reaches the end of its useful life, that will grow. The country should make better use of it, in ways that also cut the carbon emissions associated with the steel industry by 70 to 80 per cent.
That’s the plan — though you wouldn’t know it from the furore around UK steel in recent weeks. India-owned Tata Steel last week pulled back from the brink of an announcement that two of the UK’s remaining four coal-fired blast furnaces would close imminently, with an electric arc furnace to be erected in their place in Port Talbot at a cost of £1.25bn.
China-owned British Steel this week did announce their proposal to build two EAFs, close to processing facilities in Scunthorpe and Teesside, with their two Scunthorpe blast furnaces set to close on completion in two years’ time. Both companies are relying on hundreds of millions of pounds of subsidies from the government, which has remained remarkably quiet in the face of a furious trade union backlash against what are, in effect, its own plans.
This is becoming a model of how to do essentially the right thing, just really badly. Less polluting forms of steelmaking, namely using electricity to melt down scrap steel in an EAF, are inherently less labour intensive than blast furnaces. The trade unions have understandably balked at perhaps 5,000 job losses, particularly Tata’s plans for an immediate shutdown. Consultation and communication have so far been pretty poor.
Ultimately, though, it is hard to see a future for the UK steel sector that doesn’t involve switching to lower-emitting EAFs and making much better use of scrap. The emissions from blast furnaces are so vast, accounting for most of the 14 per cent of UK industrial emissions that relate to steel, that moving reasonably quickly is vital. Increasing interest in low-carbon steel from buyers, who are prepared to pay a premium according to Morgan Stanley, suggests a commercial opportunity too.
The UK produces 10-11mn tonnes of scrap steel each year, of which less than 3mn tonnes is recycled, and the rest exported. That makes the UK the largest exporter of scrap globally on a per capita basis (and the second largest on an absolute basis). That metal is largely sorted and recycled elsewhere, most likely with higher emissions per tonne than the UK’s relatively efficient sector.
How much of that scrap can be usefully retained and how it can be used is the subject of debate — and some legitimate uncertainty. One complaint is that EAFs can’t produce all types of steel. But in the US, companies such as Nucor use scrap supplemented by pure iron to produce just about everything, including high-quality products destined for the automotive industry.
It is true that some scrap exports are contaminated by elements like copper or tin that make recycling harder, particularly into higher end steel products. Julian Allwood at Cambridge university (who came up with the Hyde Park statistic) says that is partly because defunct cars, say, are shredded, essentially bonding together different metals in the process.
The trouble is that the UK, while distributing as much as £1bn in ad hoc taxpayer subsidies, has one half of an almost-strategy. It is startling that the UK government appears to have traded £500mn of taxpayer subsidies for 3,000 upfront job losses in south Wales, without a management plan or phasing agreed.
There should be opportunities here. Steel companies, certainly for the foreseeable future, will need a source of pure iron, most likely direct reduced iron produced using gas now and potentially green hydrogen in time. Most countries have a plan to produce some domestically, creating more jobs. If the UK has strategically decided against that, in favour of imports, it at least merits explanation.
Feeding the proposed EAFs, meanwhile, will require vastly larger and better collection, separation and enhancement of scrap metal, as well as manufacturing and design changes to improve efficiency. The world needs to improve at this: even the US, with its recycling-heavy sector, doesn’t do well. Most of the UK’s exported scrap could be recyclable at home if handled right, say industry sources. No one, as yet, has said anything about how this will happen in the required timeframe.
The wider lesson is this: even doing the right thing without proper workforce planning and supporting industrial strategy is a poor approach to energy transition.
