Just what is it about steelmaking? We used to snigger at despots in African countries being determined to have a domestic steel plant when everyone could see that it was a money sink, and was never going to compete on world markets. Now the UK seems to have caught the same bug, sinking £500m into a replacement for the ageing blast furnaces of south Wales.
Steel is an internationally-traded commodity. Even before the blast furnaces closed, the UK’s market share was tiny. There is plenty of it at competitive prices in the world, yet we seem to have decided that an ability to make it is some sort of badge of industrial virility. This is usually accompanied by emotive comments about how steel is literally the backbone of the defence of the realm. We have convinced ourselves that steel is somehow strategically more important than, say, oil, where we are rushing to end domestic production without a care about depending on imports.
The bitter truth is that steelmaking in the UK, barring a few specialist products, has no long-term future. Replacing blast furnaces with electric arc sounds frightfully modern and hi-tech, but the change will produce an inferior product at a higher price. The recycled steel output has a smaller range of uses than the current production, while electricity is a far more expensive source of energy than coal. Even writing off the taxpayer’s £500m will not guarantee a profit for Tata Steel’s £750m unless there is a continuing subsidy in the form of cut-price electricity.
The social costs look pretty grim, too. Although the 2,500 workers losing their jobs are being generously compensated, cash is no substitute for employment, and Gary Smith of the GMB union described the Tata deal as “hollowing out working class communities”. Meanwhile in Scunthorpe, Chinese-owned British Steel is on the brink of an announcement of more job losses. The same thing is happening at the other end of the UK, where Unite’s Sharon Graham warned that “30,000 workers in the North sea are on a jobs cliff edge.” All three cuts represent the destruction of well-paid careers, with very limited options for those whose lives are disrupted.
The root cause is the same in all cases: energy costs in the UK are too high for competitive manufacturing, pushed that way by the Gadarene rush to Net Zero. Green energy may be the future, but it is expensive, and getting more so. For those who can unravel the Byzantine maths of the latest auctions for offshore wind power, this is painfully obvious. We cannot have energy that is green, reliable and cheap. Some day this government is going to have to pick two from three or admit that those broad green uplands are a long, long way away.
Write to us with your comments to be considered for publication at letters@reaction.life
