British Steel has announced the closure of the coking ovens at its Scunthorpe works with the loss of 260 jobs, as the UK industry struggles amid high energy prices and the need to invest heavily in lower-carbon technologies.
The company’s owner, China’s Jingye Group, said the move was partly “to overcome global economic challenges” and also due to rising costs such as energy bills.
“Decisive action is required because of the unprecedented rise in operating costs, surging inflation and the need to improve environmental performance,” it said.
Jingye has called a meeting of workers for Wednesday morning to inform them of the plans, which would be subject to a consultation. The closure could take place by the end of this year, although the exact timing is so far unclear, a source with knowledge of the situation said.
The redundancies are likely to raise pressure in talks between the UK government and British Steel and Tata Steel, the operators of Britain’s blast furnaces, over funding worth £300m apiece to help them upgrade from more polluting blast furnaces to electric arc furnaces, which could use zero-emissions electricity.
Both companies have indicated that those subsidies would not meet the costs of upgrades, which could run into billions of pounds.
However, the companies are also struggling with shorter-term issues – British Steel in particular – including energy prices that the lobby group UK Steel says are higher than those paid by subsidised rivals in countries such as Germany and France. Several leading economies, including the UK, are also facing the prospect of recession or slow growth.
British Steel, which was bought by Jingye in 2020, has previously told unions that job cuts at the steelworks in Scunthorpe, Lincolnshire, could be significantly larger. A further 600 to 900 jobs are thought to be under threat across the company’s broader operations as it looks for further cost savings.
Steelworks’ coking ovens are used to bake coal at 1,100C for 18 hours to produce coke, the crucial fuel used in a blast furnace. Union sources have said the company has not yet presented any details of where it would source coke in the future, although it would almost certainly mean the blast furnaces would be dependent on imports.
The closure of the ovens has raised concerns over the future of some products relied upon by the UK rail industry. A byproduct of the coke ovens, which would not be easily replaceable, is used in the steel in rails, said a source.
British Steel’s accounts for 2021 are almost two months overdue, according to Companies House, and its auditor, Mazars, resigned last year after British Steel refused to pay its proposed fee.
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A British Steel spokesperson said: “Unfortunately, like many other businesses, we are reluctantly having to consider cost-cutting in light of the global recession and increased costs.
“Jingye is committed to our long-term future but decarbonisation is a major challenge for our business and, like most companies, we’re facing significant challenges because of the economic slowdown, rising inflation and exceptionally high energy prices.”
Jonathan Reynolds, the shadow business secretary, said it was “worrying news for our steelworkers” and reiterated the Labour party’s pledge to invest in green steel production.
He said: “Steel is the bedrock of many communities across the UK. It is the foundation our manufacturing sector is built on, crucial to any net zero ambition and the beating heart of our sovereign capability.”
