Steel Industry: Contribution to the UK Economy

Nia Griffith Excerpts

Wednesday 25th January 2023 Westminster Hall

[Dame Nia Griffith (Llanelli) (Lab)]

The steel industry—or tin-plate industry, as we call it—is vital to my constituency of Llanelli, where we take the steel from Port Talbot and make it into a range of products that subsequently become tins for food or cans for aerosols. I congratulate my hon. Friend the Member for Newport East (Jessica Morden) on securing the debate, which comes at a crucial time for the steel industry.

In the interests of saving time, I will not repeat the excellent points that my hon. Friend made on the energy issue. Energy costs are not just an immediate challenge. Now is very much decision time for the future of the steel industry. The US Inflation Reduction Act and President Biden’s determination to tackle climate change have undoubtedly accelerated global interest in decarbonisation, which poses huge challenges for the steel industry. Our steelmaking capacity is ageing, and now is crunch time for steel manufacturers, which must decide where they will invest for the future—whether it will be the UK or elsewhere.

We know that blast furnaces cannot simply be replaced by electric arc furnaces. Yes, they have a role, and could clearly be run on electricity generated from renewable sources, but the real challenge is to decarbonise the blast furnace process of making steel from iron ore. That requires huge investment in research and innovation to develop the technologies of the future. The UK Government need to make the conditions right for companies to choose the UK. We need a clear vision from the UK Government, and determination to ensure that the UK gets ahead of the game and develops the technologies. We have to be prepared to take the risk in order to reap the gains. If the UK can lead the way, we will have not only a flourishing steel industry, but the opportunity to export our steel and our technologies.

We need a clear industrial strategy, from research and innovation through development to establishing production; as well as confidence that there will be a level playing field on issues such as energy costs and confidence, and a commitment to use UK-produced steel in public procurement. The only way we will attract companies to invest in the steel industry of the future is with a proper strategy. The alternative is the demise of our industry. If we are overtaken by countries producing cleaner, cheaper steel, we will be left behind. It is not just the steel industry that needs certainty; all the associated industries need to know whether to invest.

The horrors that have unfolded in Ukraine have reminded us just how important it is that we have our own steel industry—for our security of supply and to support a range of other industries, including defence. The situation has made us refocus on the importance of our own sovereign defence capability and the need to have the materials and the skilled workforce to be able to scale up production if necessary. There is strong cross-party support for sanctions against Putin’s Russia, but as my hon. Friend the Member for Newport East explained, there are loopholes. I understand that the Government may have plans to close the loopholes, but I would be grateful if the Minister confirmed this and indicated when we can expect it to happen.

We need a level playing field when it comes to UK steel having to compete against imports. When there are distortions in the marketplace, with steel arriving at our ports from countries that give massive state subsidies to the steel industry, taking action should be well within World Trade Organisation rules, and is essential to protect our steel industry against unfair competition—all the more so given that both the US and EU protect their steel industries in this way. Without such protection, we risk losing production and workers facing redundancy, and ultimately a lack of future investment in the industry.

Despite that, in both summer 2021 and summer 2022, the UK Government made very last-minute decisions about the extension of the existing steel safeguards. This does nothing to reassure the industry. If we want future investment in the UK steel industry, companies need to know that there is strong political will to protect the industry, and that they can rely on the UK Government to protect them from being undermined by artificially cheap imports. I understand that the Department for International Trade is looking to reform the way the Trade Remedies Authority works. We need a system that really works for the industry—that can respond speedily, carry out investigations and act to protect our industry. The UK Government would do well to look at some of UK Steel’s suggestions to achieve this.

First, we need clear Government policy on how we deal with countries such as China and Russia. Secondly, given that in March 2022 we needed additional legislation to give the Secretary of State call-in powers, consideration needs to be given to how those powers could be part of the system so that the Secretary of State can use them in an initial investigation. Thirdly, reform of the way in which the economic interest test works is needed—

[Mark Pritchard (in the Chair)]

Order. I call Tim Farron.