Steel Industry: Wales

Jonathan Edwards Excerpts

Wednesday 21st February 2024 Westminster Hall

[Dame Nia Griffith]

I absolutely agree.

The Minister has previously referred to steel as “infinitely recyclable”. It is indeed a marvellous material, which is so much easier to recover and recycle than many other materials. However, while the lifecycle of a tin can may be a matter of months, steel used in car manufacturing or construction will be tied up in those products for many years to come. I very much hope that we will see an increase in investment in infrastructure projects.

We on the Opposition side have plans to make the UK a clean energy superpower. We have so much potential in Wales, with the prospect of building floating offshore wind farms in the Celtic sea and using Port Talbot and Milford Haven to deliver and service those projects. It is just a pity that through either incompetence or stubbornness the Government have wasted a year failing to get any takers for floating offshore wind because of the unrealistically low strike price offered.

Increased renewables and increased use of electricity mean upgrading the national grid structure. We need investment in our railways, housing, hospitals and so on. Have the Minister or her Department made any assessment of how much steel the UK is likely to need in the coming decade? How much of that steel will be used for short-term products that will reach the scrap market fairly quickly, and how much will be locked in infrastructure that we hope will last for decades?

Returning to the broader picture, while I recognise the contribution that the electric arc furnace can make, it is bitterly disappointing that the Government plans look likely to leave the UK as the only country in the G20 without primary steelmaking. While countries across Europe have been working on greening the primary steelmaking process using technologies such as direct reduced iron and green hydrogen—indeed, Sweden will start production in 2025—the UK Government have not supported any such venture.

There is huge competition out there to woo investment in the green technologies of the future, whether it is the US Inflation Reduction Act or similar incentives in the EU. When we look at the €2.5 billion that Germany has invested in developing green primary steel, hon. Members will understand why we in the Labour party say that that is the sort of sum needed and why, if we were in government, we would look to invest a total of some £3 billion in the industry, rather than this Government’s £500 million.

The reasons why we now face the end of primary steelmaking in the UK must include the failure of the Government to respond adequately to the asks of the steel industry, which it has set out so clearly time and again. We have pointed out, time and again, how much cheaper energy costs are in countries such as France and Germany, while in the UK there have been specific negotiated packages.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

I congratulate the hon. Lady on securing the debate and on her leadership on the issue. It seems that the only hope is to try to persuade Tata to delay some of the implementation of its plans until the change of Government, we all assume, by the end of the year.

As the hon. Lady mentioned, there is an alternative proposal from the Labour party for investment in the steel industry. Does she agree that there is a potential role for the Welsh Government to negotiate with Tata? As they sit on the transition board, they would have close relations with Tata executives to put forward the Labour plan, which would be ready to be implemented this time next year.

[Dame Nia Griffith]

Anyone who can have influence over Tata would be welcome to make those suggestions.

A moment ago, I was talking about specific negotiated packages that this UK Government have offered. Although there have been those packages, we can see why when steel and high-energy industries make decisions, they cannot rely on limping from package to another but need long-term security with low energy prices, requiring substantial measures from the Government such as massive investment in renewables and reform of the energy market. We in Llanelli look across at IJmuiden in the Netherlands, where Tata has a tin plant works similar to ours. However, in close proximity to IJmuiden, Tata will keep a blast furnace open and develop a direct reduced iron facility. This is the reality we are facing: greater investment for the future going elsewhere. The UK Government need to ask themselves why. I hope that in responding today the Minister will answer my specific questions about the challenges facing Tata’s tinplate works at Trostre, as well as the broader issues facing the steel industry across Wales.

--- Later in debate ---

[Christina Rees (Neath) (Lab/Co-op)]

Thank you, Sir Gary—21 again! As always, it is a pleasure to serve under your chairmanship.

I congratulate my hon. Friend the wonderful Member for Llanelli (Dame Nia Griffith) on securing this vital and timely debate. As we contemplate the future of the steel industry in Wales, we are discussing not merely the fate of an industrial sector but the heartbeat of a nation’s economy and identity, and nowhere more so than in the Swansea bay region generally and Port Talbot specifically. The area that includes my Neath constituency and its town has long been synonymous with steel production, its history intertwined with the rise and fall of coal and the resilience of its workforce. Today we stand at a pivotal moment in that narrative, poised to script the next chapter in the saga of Welsh steel.

The challenges facing the steel industry are undeniable. Global competition, fluctuating market demands and environmental concerns loom large on the horizon, yet alongside those challenges lies the opportunity to bring about transformation and renewal. The industry cannot do that against a backdrop of uncertainty and a diminished workforce. The idea that 2,800 jobs will be lost from Tata Steel operations across the UK—the majority from Port Talbot—is unthinkable. The rejection of well thought out union plans for a gradual transition to decarbonisation means the almost immediate closure of two blast furnaces. The single electric arc furnace replacement will obviously produce less carbon dioxide, but also fewer jobs.

First and foremost, innovation must be at the fore- front of our endeavours, from embracing advanced manufacturing techniques to investing in research and development. We must harness the power of technology to drive efficiency and sustainability. Innovation will always be the cornerstone of a vibrant steel industry in Wales, but electric arc furnaces do not produce virgin steel and the difference must be considered. The UK has only two sites that use conventional blast furnaces—Scunthorpe and Port Talbot—which collectively produce 5.9 million tonnes of steel per year and make up 82% of UK steel production. Despite the UK importing most of its virgin steel, the notion that we become a country that produces none is beyond the pale. British Steel, the owner of the Scunthorpe plant, is also planning to replace its virgin steel production by 2025. Should that happen, the UK will become the only G20 country that does not produce its own virgin steel. The consequences need to be fully understood.

Secondly, collaboration is essential for success. Alongside partnerships forged between industry, academia and the community, the UK Government need to step up to the table. A £500 million grant is welcome, but much more can be done on energy prices, R&D support and fiscal leverage. In addition, neither the Welsh Government nor the unions were involved in discussions prior to the announcement of the investment deal. The multi-union plan called for an additional investment of £683 million, involving a two-stage transition that would protect a further 2,300 jobs for over a decade, and not involving a single compulsory redundancy. The plan accepted that one blast furnace, and potentially the coking ovens, would close during a managed transitionary period that involved producing iron for use in the new electric arc to be installed by 2031. The second blast furnace would close in 2032.

It is clear that sustainability must be a guiding principle. We are all aware that the steel industry has a significant environmental footprint, and we cannot ignore our responsibility to future generations. By investing in clean technologies, reducing carbon emissions and promoting circular-economy practices, we can minimise our impact on the planet, while maximising our long-term viability. Sustainability is not just a moral imperative; it is also a business imperative, as consumers and investors increasingly demand ethical and eco-conscious products.

Although I appreciate the need for decarbonisation, we must remember that steel accounts for only 14% of industrial emissions in the UK, which in turn is around only 2% of total national emissions. Importing virgin steel simply transfers the emissions and decarbonisation responsibility. Such overseas manufacturing is also far more carbon-intensive.

Lastly, we must never forget the human element at the heart of the steel industry. Our success is built on the dedication and skill of the men and women who toil day in, day out. As we navigate the challenges of the future, we must prioritise the wellbeing of our workforce today, ensuring fair wages, safe working conditions and opportunities for growth and advancement. A thriving steel industry is not just about profits; it is about empowering communities and enriching lives. Employment in the steel industry is not what it used to be, but a quarter of all steel industry employees work in Wales. As such, job losses are disproportionately felt in Welsh communities.

[Jonathan Edwards]

I commend the hon. Member on her excellent contribution. Is the reason for the backlash to this announcement not the fact that it appears that the UK Government are providing £500 million to lose 3,000 jobs in Wales, which has been a massive PR disaster for them?

[Christina Rees]

I completely agree with the hon. Gentleman, and thank him for his important point.

The future of the steel industry in Wales is not predetermined; it is ours to shape and define. By embracing innovation, fostering collaboration, championing sustainability and prioritising our people, we can build a future where Welsh steel shines brightly on the global stage. The story of steel should not feature uncertainty, job losses and community adversity. Let us write the next chapter in the industry’s history: one of resilience, renewal and prosperity for generations to come.

--- Later in debate ---

[Jonathan Edwards]

This is a genuine question—I am not trying to catch the hon. Lady out. As I alluded to earlier, there will be a change of Government before the end of the year and the hon. Lady will effectively be the Minister. Are the Labour Front Benchers now in a position to negotiate directly with those steel producers about the plan that will be in place in a year’s time? They are essentially a Government in waiting, are they not? Are those negotiations happening, or is there no chance of them happening at all?

[Sarah Jones]

Obviously, we need to wait and see if there is a change of Government, and we would not assume that. Many of us are in constant conversation with Tata and the unions about the way forward, and we are also talking to the Government about a different approach. We are doing everything we can from an Opposition point of view, but obviously the Government hold the reins at the moment.