Steel Industry

Viscount Hanworth Excerpts

2nd reading
Saturday 12th April 2025 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, why have we been recalled with such urgency to debate the future of British Steel? The immediate answer is that the blast furnaces at Scunthorpe require to be fed with iron ore and coking coal to keep their fires alight. If the fires were to be extinguished, the contents of the furnaces would solidify and we should lose our capacity for creating virgin steel from basic ingredients. We should lose a facility on which we have relied for more than 300 years to sustain our industrial productivity. Our steel-making capacity would become entirely dependent on electric arc furnaces, which would be used for the reprocessing of scrap metals.

The Chinese owners of British Steel, Jingye Group, have been impervious to the blandishments of the Government, who offered to pay for the ingredients that would feed the blast furnaces. From Jingye’s point of view, it is simply uneconomic to produce steel in Britain.

The problems of our steel industry were developing throughout the Conservatives’ period in office, during which time the industry was in foreign ownership and financial crisis. The British Steel Corporation was privatised in 1988 by the Thatcher Government, and it merged with the Dutch National Steel Company in 1999 to form the Corus Group. This was taken over in 2007 by the Indian Tata Steel Corporation. In 2016, Tata divested itself of its UK assets, which were acquired by Greybull Capital for the sum of £1. It was sold to the Chinese Jingye corporation in 2020.

The writing had been on the wall long before the acquisition by Tata Steel. However, during the years of the Conservative Administration, nothing was done to protect this strategic asset. The question that concerns us today is whether it is appropriate to take drastic and costly action to protect our native steel industry and whether it is an industry that is worth saving. I believe that the preservation of our native steel-making capacity is a national priority. Our long-term prosperity and our national security depend on our being self-reliant. If we do not create a viable industry on the basis of the existing British Steel Corporation, we shall be hard put to re-establish a steel industry.

An immediate issue is whether the two blast furnaces at Scunthorpe need to be kept alive, and the answer must be in the affirmative. They represent the only means by which we can produce the high-grade steels that are required by our automotive and aviation industries. The preservation of the blast furnaces would be the first step in a protracted process of restructuring our steel industry, which would be beset by numerous difficulties. Blast furnaces require iron ore and coking coal, which come from foreign sources. Sweden is no longer the principal source of iron ore: it comes mainly from Russia, Brazil and Australia. Coking coal exports are dominated by Australia, the US, Canada, Russia and Mongolia, which together account for 90% of the world’s exports. I must assert, by the way, that Cumbrian coal, which has a high sulphur content, is inappropriate for producing coking coal.

Ultimately, blast furnaces, which depend on vulnerable supplies of materials and produce large quantities of carbon dioxide, must be replaced by other technologies that are yet to be fully developed. These might depend on hydrogen and electrochemical processes but, in the meanwhile, some major reorientations will be required if we are to fully exploit the technology of electric arc furnaces. At present, Britain exports 80% of its scrap steel, making it the world’s second-largest exporter. We are thereby stripping ourselves of a vital resource at a time of rising domestic demand.

The scrap steel ought to be consigned to domestic arc furnaces. However, as we have heard time and again, Britain has some of the world’s costliest industrial electricity. The cost is three or four times greater than in the United States and significantly greater than in any of our European neighbours. The costs of our electricity are due in large measure to the costs of our network, which is increasingly reliant on renewable sources of energy that are intermittent. Such costs will not be alleviated unless we resolve to generate a substantial proportion of our electricity from nuclear power.

The preservation of our steel-producing capacity will depend on a long-term strategic plan, with social direction from the Government, as well as ample funds provided by the Government. This surely implies the nationalisation of the industry. In the absence of such a strategy, we will become increasingly dependent on and subservient to other nations, which will be both the owners of our industrial infrastructure and the providers of our strategic materials.