Plans to reduce the UK’s carbon impact will fail if they fail to bring people along with them. The disagreements breaking out over a proposed move to green steel in Port Talbot shows the sharp end of this debate – but with broader ramifications.

Tata Steel reached an agreement with the UK government in September on a “joint investment package” at Port Talbot. The plan was to see steelmaking brought up to date, modernising production and protecting skilled jobs.

Going electric

Tata agreed to stump up £1.25 billion, while the government would come up with a £500 million grant. Together, they would invest in a new electric arc furnace (EAF).

The company has said the plan would help it tackle its financial losses and the fact that it is the UK’s single largest CO2 emitter. Moving to an EAF would cut carbon emissions by around 85%, reducing emissions from Port Talbot by 5mn tonnes per year.

The company pays around £70-80mn in carbon costs. Carbon prices are widely expected to increase in the coming years. Tata has said it is “not an option to continue with the status quo and if we don’t act to dramatically reduce our CO2 emissions, we will be out of business”.

Using an EAF requires fewer workers, as the facility does not need various units such as coke ovens and blast furnaces. Tata has said launching an EAF would allow it to invest in other areas, transforming Port Talbot into a green hub. It has suggested options such as building offshore wind turbines or producing low-carbon jet fuel.

According to the company, Tata Steel UK has lost more than £4bn after tax since 2007. Losses have been running at more than £1mn per day.

An EAF uses electricity to melt scrap steel. The move to scrap steel should increase UK security, Tata has said, making it less reliant on iron ore imports from around the world.

The UK currently exports around 8mn tpy of scrap steel. Capturing this at home and reprocessing it would reduce imports in addition to reducing emissions.

Unite the Union hands over petition calling for support at Tata Steel's Port Talbot works — *Unite the Union hands over petition calling for support at Tata Steel’s Port Talbot works. Source: Unite the Union*

Steel security

Steel is crucial for infrastructure planning and net zero needs will play an important role in future demand. The UK produces around 5.6 million tonnes, meeting around 70% of domestic needs. The Green Alliance has forecast demand could increase 26% by 2030.

However, steelmaking fell in 2023, 6.5% from 2022. Tata Steel is the single largest steel facility in the country, capable of turning out 5mn tpy.

The steel sector is under pressure from a number of areas. In addition to pressure to decarbonise, the area also face higher power prices than its European competition. Industry group UK Steel noted that steel producers in this country pay nearly twice as much for electricity, compared with those in Germany and France.

The group criticised the government’s decision to abandon Green Power Pools, in the electricity market review.

A switch to EAFs would see the sector’s electricity consumption roughly doubling, UK Steel said.

Tata has raised the prospect of further investments in its plant, most notably in a direct reduced iron (DRI) plant. Under this process, oxygen is removed from iron ore – reducing it. New DRI technologies use hydrogen to extract the iron, rather than using coal. Using hydrogen emits only water, making it a tempting tool for decarbonisation.

The company said it could go ahead with a DRI plant if it wins more support from the government. It would also need access to either natural gas or hydrogen.

Tata has said that many of its “heavy end” plants, such as coke ovens and blast furnaces, are reaching the end of their lifespan. New investments in these facilities would continue the use of coal, which will have little place in the future.

Labour’s stance

The Labour Party has set out plans for a £3bn investment in green steel – and cautioned Tata not to act too suddenly at its Port Talbot facility.

Newport West MP Ruth Jones, speaking in February, said a Labour government would provide a “bridge – not a cliff edge – to a just environmental transition using a blend of technologies”.

There is “hope for steel”, Jones said, saying Labour would work with the unions, not against them.

“Decarbonisation cannot and should not mean deindustrialisation, as we know that that increases costs and pushes the environmental burden on to developing countries,” she said.

Newport East MP Jessica Morden attended a meeting on April 19 and expressed support for the union position. The plans would be a “huge blow” for the steel industry and local communities, she said. Tata’s plans would drive up reliance on imported steel from “heavy-polluting countries at a time of global uncertainty”.

Morden cited the Multi-Union Plan for steel as a viable alternative.

It's not too late for Tata and the government to change direction on the UK steel industry, and to adopt the "credible" (Tata's word) Multi-Union Plan. ⤵️@CommunityUnion #WeNeedOurSteel pic.twitter.com/qj7cmQhbB7
— Jessica Morden MP (@jessicamordenmp) April 23, 2024

Socialising green steel

The sector employs just under 40,000 people directly, with another 50,000 in the supply chain.

A petition, backed by Unite the Union, was handed over to the Senedd in Cardiff on April 23. According to the union, it had 30,000 signatures.

It complained the government had a lack of support or “long-term plan” for steel. As a result, Tata is pushing through “unnecessary and destructive plans on its workers. This is an industry crucial to the economy of South Wales and to our national security which can and should have a bright future,” Unite general secretary Sharon Graham said.

The unions take issue with Tata’s shift to a 3mn tpy EAF facility.

Instead, the GMB Union and Community have called for the company to move ahead with a smaller 1.5mn tpy EAF. It would also maintain one of the blast furnaces until it ages out, in 2032.

The plan says a phased transition would avoid the immediate loss of 3,000 jobs and would reduce the technological risks.

An EAF of the size Tata is planning would be one of the biggest in the world, it says. The new EAF would also risk an over reliance on the supply of clean scrap, HBI and pig iron. The UK does export scrap iron, the plan notes, but it is not of the standard required for the EAF.

The union plan also raised concerns on what happens with the introduction of a carbon border adjustment mechanism (CBAM).

The union plan carries a price tag of £683mn, they said. This would secure 2,300 jobs for around a decade, giving time for further plans to play out.

Wider discontent

There is a clear challenge, in Wales and the broader country, about engagement with the transition. A report this week from Climate Outreach, found only 11% of people felt they had been informed in advance of new policies.

Respondents to Climate Outreach’s polling found that people attributed the lack of information to the UK national government, rather than the Welsh government.

Wales has taken an aggressive stance in tackling climate change, declaring a “climate emergency” in 2019.

Considering the UK’s European peers, there is clearly appetite for states to support their steel industries. Germany set out a 2.6bn euro (£2.2bn) plan to assist the decarbonisation at Saarstahl and Dillinger this year, for instance. Next year, it plans to provide 1.3bn euros (£1.1bn) to ArcelorMittal at Bremen and Eisenhüttenstadt.

The UK government has taken steps to support industries it sees as important to the country’s future. For instance, the Industry Supercharger reduces power prices for some areas, such as steel, metals and chemicals.

Earlier this month, Unite the Union members voted to strike at Port Talbot in protest at the loss of jobs. The union will schedule action to cause “maximum impact”, it said.

Relations between the management and the workers is increasingly sour. Tata has threatened to reduce its redundancy packages for strikers, according to the BBC.

Nusrat Ghani MP, Minister of State at the Department for Business and Trade, visits British Steel in February 2024 — *Nusrat Ghani MP, Minister of State at the Department for Business and Trade, third from left, visits British Steel in February 2024*

Tata is not alone in its plans to change its steelmaking from traditional facilities to EAFs. Chinese-owned British Steel is also working on plans for two EAFs at its sites in Teesside and Scunthorpe.

It is not yet clear what impact the move to EAFs will have on employment at British Steel. However, unions have expressed concerns that job losses will follow.

British Steel has secured backing from the government of £300mn. However, it is reportedly working to extract more from the government, of around £500mn.

The government, companies and workers are of course all pursuing their own ends. Labour has talked of a “new deal” for workers, suggesting such a compact could increase productivity. Throwing money at the problem will have an impact, but similar efforts to strike grand bargains have been tried – and failed – in the past.

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