British Steel owner itching to invest but Boris' green agenda halts plans

2021-02-18

Feb. 17, 2021 - Plans by British Steel’s Chinese owners to invest up to £1.2bn in the company have been stalled by potential blast furnace legislation.

Jingye took over the steelworks with promises of big upgrades, but is wary of future environmental laws which could stop steel production using blast furnaces.

The money has been on hold in the year since the Chinese steelmaker rescued the Scunthorpe-based company from administration.

Huiming Li, chief executive of Jingye Group, at British Steel's Scunthorpe works
where he has promised big investment

British Steel faced years of under-investment when it was owned by Tata and later Greybull.

Jingye bosses’ winning bid included promise of revitalising the steelworks, but are now uncertain about how best to spend their money, said a report.

Chief executive Ron Deelen said: “Our Chinese owners would like to invest. They would like to invest in the four [blast furnace] queens, in blast furnace technology.

“However, since they took over things have changed. The climate committee has given clear advice to the Government – it’s not law yet, but probably will be by 2035 – saying they don’t want to see any blast furnace steel produced in the UK.”

He added: “Without clarity, that money is on hold because we can only spend it one time.

“The sooner we spend it, the better, because it will help us get to a sustainable cost level.

“What we are doing at the moment, I would call maintenance investments, £40m to £50m a year. We would like to start spending big money.”

Ron Deelen, chief executive of British Steel

A green alternative to blast furnaces are electric arc furnaces that recycle scrap steel. However, they consume huge amounts of electricity, which Britain pays substantially more for than rivals in Germany and France.

Mr Deelen says that Jingye doesn’t have buyer’s remorse over last year's deal. He hopes that government ministers will offer a clear direction which can allow Jingye to spend its money wisely.

Since the company took over, 800 additional jobs have been created at the site as work has been brought back in-house.

Huiming Li, Jingye group chief executive and son of the company’s founder, has also been based in Scunthorpe since talks first began.

Mr Deelen called his presence – along with 80 other Chinese staff – a “big compliment”.

Queen Anne and Queen Victoria Blast Furnaces at the British Steel Scunthorpe site

In the past twelve months, coronavirus and the Brexit deal have also shaken up Jingye’s vision for British Steel, leading to “challenging” conversations between the two companies.

UK steel being sold into the EU has lost protection from 25 per cent tariffs, meaning the industry has been “extra punished” compared to other businesses.

“One thing is for sure: we ended up with a Brexit agreement which says free trade, but doesn’t mean free trade for the steel industry,” Mr Deelen said.

“At the time, the UK did not have a problem with those safeguards as we were in the EU.

“Now we are affected by those safeguards and they mean that we, in principle, cannot grow as we don’t have free trade.

“We’ve got an owner saying: ‘OK, let’s have a look at new markets.' We now have to say: ‘Well, the EU market, which is closest to us, we cannot go there because we will attract a quota, so nothing to sell there’.”

The British Steel chief executive would ideally like the government to “go back to Brussels and say: ‘OK, perhaps we made a small mistake with the steel industry and we would like to renegotiate it’.”

He remains adamant that domestic steel production needs to have a future.

“Steel is everywhere: in buildings, the chair you are sitting on, your glasses. Why would we give that up?” He said.

“Sure, we could import it, but there’s so many jobs we would give up and what would replace them? And if we import it, how do we guarantee it’s the clean steel the Government wants?

“All the British industries that use our steel would be at stake if they relied on imports.”