UK passes emergency legislation to keep British Steel plant operational 

The UK Parliament has passed emergency legislation granting ministers powers to compel British Steel to keep its Scunthorpe blast furnaces operational. The bill, approved in a special Saturday session and receiving royal assent the same day, follows failed negotiations with Chinese owner Jingye. The government accused Jingye of intending to shut down the plant by halting raw material purchases. The legislation allows criminal penalties for non-compliant executives and safeguards 3,500 jobs. While stopping short of nationalisation, public ownership remains likely. Prime Minister Keir Starmer has pledged support, calling the measure “proportionate and necessary” to preserve the UK’s steelmaking capacity. (The Guardian) 

Why does this matter? British Steel – owned by Jingye since 2020 – is the primary supplier of steel rails to Network Rail and delivers products to the UK’s construction and automotive sectors. The Scunthorpe site produces virgin steel made from iron ore and coking coal using the UK’s last two blast furnaces. Without these raw materials, the furnaces would cease to function. Restarting them would be an extremely difficult and expensive process. Without these furnaces, the UK would become even more reliant on steel imports. This development is especially relevant to Rio Tinto as it is a leading supplier of iron ore to the steel industry.  

Jingye previously rejected a £500m ($668m) government support package to help British Steel transition to green steelmaking. The offer matched funding granted to Tata Steel, owner of the Port Talbot steelworks in Wales, last year. However, Jingye had requested at least £1bn for a £2bn project to build two electric arc furnaces (EAFs) at Scunthorpe. The company has lost £350m since it took over British Steel, and in March, it said the plant was losing £700,000 per day, prompting it to consider closure.  

After taking control of the company, the UK government scrambled to secure the critical raw materials to keep the furnaces functioning, with shipments arriving from the US and Australia. However, officials still need to establish a stable and reliable supply chain. Meanwhile, Business Secretary Jonathon Reynolds suggested that a revised employment model may be necessary to maintain the long-term future of Scunthorpe, as could new facilities and new technologies.  

Reynolds also stated that the nationalisation of British Steel is the “likely option”, although he stressed the need for a private partner to co-fund its transformation. He originally ruled out future Chinese involvement in the UK steel sector, later softening his stance by not completely dismissing Chinese firms and instead viewing them in a “different way”. Industry Minister Sarah Jones also said she would not reject the possibility of another Chinese partner, noting that no new buyer is currently available.  

Jingye said it “understood” the UK government's action but called for the protection of its rights as a foreign investor and expressed willingness to help secure British Steel’s future. It stressed its consistent commitment despite Brexit and Covid-19 challenges. The Chinese embassy defended Jingye’s role in saving jobs after Greybull Capital’s 2019 exit and accused UK politicians of unfairly attacking China, warning this could deter future investment. 

The Institute for Energy Economics and Financial Analysis (IEEFA) has argued that the British Steel crisis offers a chance to modernise the UK’s steel sector by shifting from blast furnaces to EAFs, using imported green iron. It challenges concerns over EAF steel quality, citing innovations by JFE and Nucor, and suggests the UK need not build domestic direct reduced iron (DRI) plants. Instead, it could make use of domestically available scrap steel and replace imports of iron ore and coking coal with lower levels of green iron imports from countries such as Sweden, Canada, Brazil and Australia, which have abundant renewables to produce green hydrogen to manufacture DRI.  

Indeed, as noted by the IEEFA, Rio Tinto has agreed to purchase and on-sell excess green iron, known as hot briquetted iron (HBI) Stegra (formerly H2 Green Steel) produces at its Swedish steel plant, marking the start of a new global trade.