Steel Industry: Wales

Stephen Kinnock Excerpts

Wednesday 21st February 2024 Westminster Hall

[Dame Nia Griffith]

Indeed, we do seek a just transition for the steel industry.

Of course, it is not just Trostre that Port Talbot supplies. If, as current plans indicate, the idea is to close the blast furnaces several years before the electric arc furnace is ready, all the downstream customers will need supplies. The Government could argue that if Tata closes the blast furnace in 2024 or 2025 but does not have an electric arc furnace up and running before 2027, how it bridges that gap, how it sources supplies elsewhere and how it keeps its customers happy are its problem. However, if those supplies are not there, downstream businesses could go out of business, causing huge job losses. It would be catastrophic for us in Llanelli to lose Trostre. Because the Government are putting half a billion pounds in, and because of the worry about job losses, they should seek assurances from Tata about Trostre, which is why I asked the Minister that question.

We accept that the electric arc furnace has a role to play. Indeed, CELSA Steel UK in Cardiff, a very successful business, produces steel from an electric arc furnace. However, there is work to be done to assess the suitability of the steel produced in electric arc furnaces to meet all the requirements of the products produced in Trostre. It is not as simple as throwing any old scrap into the electric arc furnace; clearly, the quality of the source material is important. I understand that a certain amount of metallics are required, which are not necessarily easy to source. We currently export scrap steel, and it is easy to see the logic of recycling that steel here in electric arc furnaces. However, we cannot assume that all that scrap steel will just turn up at the electric arc furnace in Port Talbot or at the one that I understand is planned for Scunthorpe: it must be sourced.

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend is making an absolutely excellent speech. Picking up on her point, there is a need to sweeten the mix in an electric arc furnace with iron ore-based metallics; otherwise, there is no way that we can make the high-value products such as those for the automotive sector and tin cans. Is she aware that only 3% of the world’s iron ore-based metallics are in a pellet form that can be transported across the world and put into an electric arc furnace? Does she therefore agree that by far the best option would be to keep blast furnace 4 going so that we can continue to produce the ore-based metallics for the electric arc furnace, because with 3% of the global supply there is no way that that will be possible?

[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.

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[Stephen Kinnock (Aberavon) (Lab)]

It is a pleasure to serve under your chairship, Sir Gary. I congratulate my hon. Friend the Member for Llanelli (Dame Nia Griffith) on securing the debate and on making such a powerful case both for the Trostre works in her constituency and for the entire Welsh and British steel industry.

It has been said many times, but merits repetition, that the Port Talbot steelworks in my Aberavon constituency is the beating heart of our community and our economy. For generation upon generation, the people of Aberavon have made the steel that has built our country. Quite simply, steel is who we are. This debate is not just about what steel means to my constituents; it is about our entire national story, because Britain as we know it today simply would not exist were it not for our steel industry. Steel makes everything from the cars we drive to the houses we live in and the offices we work in. It even makes the knives and forks that we eat our meals with, and the humble tin can, as my hon. Friend pointed out.

But our pride never slips into sentimentality or nostalgia. Steel is not a sunset industry, and the steelworks is emphatically not a museum. Steelworkers have experienced enormous technological change over the last 30 years, and every time they have risen to the challenge and adapted to it. When a customer asks for a new grade or quality of steel, our steelworkers deliver it. Indeed, most of the grades of steel being made in the Port Talbot steelworks today did not even exist 10 years ago. It is a hotbed of innovation, and every time I go into the steelworks—I have been many times—I am truly impressed and inspired.

When I go into the works, I also see a workforce that is deeply frustrated. The steelworkers know they are making the best steel that money can buy, but for 14 years they have been competing with one hand tied behind their back. They face almost twice the energy costs of their competitors in France and Germany. Government contracts are going to foreign steelmakers, and Royal Navy ships are being made with foreign steel. Our steelworkers are forced to look on helplessly as other Governments around the world bring forward policies, strategies and billions of pounds of investment to support their steel industries, while our Government sit on their hands. We are not here to plead for special treatment or charity; we simply demand a level playing field.

That brings me to the deal between Tata Steel and the UK Government, which is based on £500 million of taxpayers’ money being spent on making 2,800 people redundant—and that is not counting the huge impact on supply chains and contractors. As I have said, nobody is burying their head in the sand. Everyone can see that our planet is burning, and that customers around the world are looking for zero-carbon or low-carbon products. Even countries such as India and China will ultimately be forced to phase out their blast furnaces. The question is not whether the transition is coming, but how to make it work for jobs, our planet and national security.

It is crystal clear that the plan that is being pushed by Tata Steel and the UK Government fails on three counts. First, it fails on jobs. In the US, Joe Biden’s £290 billion Inflation Reduction Act is creating 170,000 green jobs. In Europe, national Governments are investing billions of euros in decarbonising their single steel plants. The UK is the only country that is throwing thousands of steelworkers on the scrapheap.

Secondly, the plan fails on decarbonisation. The Tata-Tory plan is based on importing millions of tonnes of semi-finished products from India, where steel production is 30% to 40% more carbon intensive than in the UK. The deal is based on exporting jobs from Wales to India, and importing carbon from India to Wales. You could not make it up.

Thirdly, the deal fails on our national security. Electric arc furnaces alone are not capable of making all the grades and qualities of steel that are required to meet the current order book, let alone to embrace the opportunities of the future. The result, in this dangerous and turbulent world, is that the UK will be the only country in the G20 that is unable to make its own steel from scratch. That is madness.

Tata has a choice. It could carry on with both blast furnaces for the foreseeable future, which would mean losing customers, making big losses and eventually closing. Nobody wants that. It could go for the 3 million tonne electric arc furnace-only model, which forces a dependency on scrap steel and on imports while making 2,800 people redundant. Let us call that the cliff-edge option.

The final and best option is to adopt the compelling multi-union plan, which would protect 2,300 jobs nationwide over a decade and would see no compulsory redundancies at Port Talbot. In that plan, blast furnace No. 4 would continue to run until the end of its lifecycle in 2032, and a combination of new technologies, such as direct reduced iron, would reduce reliance on scrap and enable Port Talbot to produce the iron ore-based metallics that are vital for the electric arc furnace to function and deliver the entire customer portfolio. Let us call that multi-union plan the bridge from where we are today to where we need to be.

I urge the Tata leadership and the UK Government to walk back from the cliff edge. Choose the bridge to 21st-century steelmaking. Choose the bridge to a committed workforce that will strain every sinew to deliver. Choose the bridge to long-term commercial competitiveness and profitability. I also say this to Tata: remember that a general election is coming, after which, I hope, Labour can deliver a new Government that will replace the chaos and incompetence with stability, predictability and diligence. In place of the laissez-faire negligence of the last 14 years, it will find Labour’s £3 billion steel renewal fund to drive and support the transformation of our steel industry in a way that sustains jobs and bolsters our national security.

Once a blast furnace is extinguished, that is it—there is no turning back. So I urge Tata not to take any decisions now that cannot be reversed following the general election. Tata and the Government can either take the path of managed decline, or they can get behind the multi-union plan. They can either take the cliff edge, or choose the bridge. Let us hope they make the right choice. We need our steel—let us value and fight for it.

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[Stephen Kinnock]

I know that my hon. Friend is reaching the end of her speech, but something just occurred to me. I was very pleased to join the Welsh Affairs Committee evidence sessions, and during the second session I asked the Secretary of State for Wales whether the UK Government have attached any strings to their £500 million in the form of job guarantees, and whether he was clear that the electric arc furnace model is going to work without access to iron ore-based metallics. In response, he referred me to the Department for Business and Trade, and said, “Well, they struck the deal, so they should be able to answer your questions.” I wonder whether my hon. Friend might wish to add another question to her list—whether there were any strings at all attached to the £500 million.

[Beth Winter]

That is an extremely important question. Another question that my hon. Friend raised to which we did not get a response was on the timeframe within which the £500 million is going to be paid. A series of questions were asked during the four evidence sessions that day—if the Minister has not seen the transcript, I urge her to look at it—and a number of them remain unanswered. We have brought some of them to light here today.

My hon. Friends have spoken in much more detail about the devastating impact that the closure of the steelworks in Port Talbot, and many other businesses in Wales, is going to have on our communities. Wales was at the forefront of the industrial revolution—our communities were built on coal, iron and steel—but our history is one of wealth being extracted from our country for the benefit of a few, and that continues. This is a prime example of the lack of consideration given to the people and communities of Wales.

We can and will be at the forefront of change. The multi-union deal—indeed, all the deals that have been proposed by the trade unions—offers a solution. Wales can be at the forefront of a green industrial revolution, where the wealth is not only created in Wales but retained in our communities, so that we no longer suffer unacceptable levels of poverty and deprivation. We are a wealthy nation in terms of our natural resources, and we deserve a different future. We will continue to stand in solidarity with our workers as well as our trade unions to say that we are not going to put up with the continued extraction and exploitation of our communities in Wales. I look forward to hearing the Minister’s response to my specific questions. Diolch yn fawr.

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[Sarah Jones]

That is not my understanding—no. What we are trying to focus on in any conversations we have about any industry on steel is what the future is and where we go from here—that is the important question.

My advice to the Minister is to go to the hon. Member for Ashfield (Lee Anderson) and talk to him about when he worked down the mines, and what happened to his communities when the mines shut—the cliff edge, the redundancies, and the closure of all the community assets that went with it. That is what we risk doing in Port Talbot with the cliff edge that we face—nearly 3,000 jobs, as well as the huge knock-on impact of one job in the plant linked to three jobs in the community. Let us not lose 3,000 jobs in Port Talbot. Do not spend half a billion pounds on that. Let that not be the Government’s legacy.

It is not too late; there is an alternative that we could all work towards. The multi-union plan helps us to transition in a way that protects jobs. That is what the Government should be talking about to Tata. It is not too late for the Government to have a steel strategy, to spend taxpayers’ money in a way that works for the UK, our economy and our security, and to listen to their own work, if not Labour’s. The Government’s 2017 review, “Future capacities and capabilities of the UK steel industry”, identified the barriers to growth: supply chains, competitiveness, skills, and research and development capability. Has the Minister read that? What is the Government’s response to that review from 2017? It could do with an update now but the basics are there. The Harrington review is clear:

“The reality is that many of our competitors chase investments via their industrial strategies backed by substantial government support…The UK needs to respond.”

Has the Minister read the Harrington review and what is the response on steel? What is the Government’s steel strategy?

Ministers talk about how important scrap is going to be, and of course it is for electric arc furnaces, but how are they incentivising measures to keep our scrap here rather than exporting it, which is currently the case? Ministers talk about how we need new technology, but electric arc furnaces are not really the new technology any more—they are years old. What are we doing to take us towards a direct reduced iron facility in the UK using hydrogen? What is the plan? What is the plan to grow the steel industry and where is the ambition? What are the Government doing about carbon border adjustment mechanisms? The steel industry will be exposed to unfair competition, so what is the Minister going to do about that? What is the plan on skills, and what is the Government’s view of the multi-union plan for steel in Port Talbot?

Many of the manufacturing industries that I meet across different sectors are at a crossroads. Bills are high, there is no strategy to support them, they are reducing their output and they are struggling to find people to work with them. The steel industry in Wales is a case in point; the Government’s last-minute, chaotic deal was a masterclass in how not to run the transition. Members across the House are worried about the future of the UK steel industry. Members across the House do not want thousands of steel workers to lose their jobs.

[Stephen Kinnock]

My hon. Friend is summarising the discussion extremely well. I declare an interest as a member of the transition board. During the board’s discussions, we talked about what the vacancies looked like in the labour market in south-west and south-east Wales, and the vast majority of vacancies are in the retail and healthcare sectors. Those are really important sectors and really important parts of our economy, but does my hon. Friend agree that there is not really a connection between the skills and experience of the men and women who have worked in the blast furnaces, for example, and those required to fill the vacancies in the labour market outside those steelworks, and that that is extremely worrying?

[Sarah Jones]

My hon. Friend makes a really good point, which is why we keep coming back to this cliff-edge approach and saying that it is not the way to transition. If we think about south Wales and the Celtic sea, we think about the huge opportunities with an industrial strategy and industry working together with Government, including the jobs and growth that we could create, but do we have any of that under this Government? No, because they do not even have the starting point of a plan for steel.

Members across the House do not want to see this country becoming the first developed country in the world without the capacity to produce primary steel. Is the Minister concerned about our defence capabilities if we lose the capacity to make steel here from scratch? Does she think that the Government’s plan is really money well spent? Can she answer the question that was originally put today: what conditionality has been placed on this deal? We keep asking for the answer to that question, but we have yet to receive it.

Labour will have clarity of vision on steel. We will invest to unlock private sector investment and we will work hand in glove with the private sector. We will use our flagship policies—the national wealth fund, GB Energy becoming a clean energy superpower, grid reform and an industrial strategy—to make the UK a place to invest in, not a place to leave.

Once again I thank my hon. Friend the Member for Llanelli for making such a brilliant speech today and I also thank all the Members who have contributed to the debate. I hope that this debate serves to raise the Government’s game, but Labour stands ready to step in if it does not.

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[Ms Ghani]

I will in a moment.

I am on record as having had a regular, constructive relationship, so it disappoints me when Members come to this place and do not accept the reality of what was taking place in Port Talbot. If we had not provided support—the biggest support we have provided to the steel sector—there would have been a devastating effect on the entire 8,000 jobs.

[Stephen Kinnock]

Will the Minister give way?

[Ms Ghani]

There is a queue.

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[Ms Ghani]

There is a queue.

[Stephen Kinnock]

Surely when the Government entered into a negotiation with Tata Steel, which is highly experienced in the business of negotiation, they considered the possibility that a gun was being held to their head, and that Tata Steel would of course make threats about total closure because that would strengthen their negotiating position. Were the Government completely naive or just incompetent when they went into a poker game dismissing the possibility that they might be getting bluffed?

[Ms Ghani]

The hon. Gentleman knows better than most that these conversations and negotiations have been going on for years. The Labour party had an opportunity to invest in the blast furnaces when it was in government, and it did not do so. He also knows that the blast furnaces are coming to the end of their life, so a decision would have to be made at some time. Tata could have decided to exit completely, which would have resulted in a loss of the 8,000 jobs and certainty in the supply chain. The hon. Gentleman knows that, because he had I have been at meetings with the unions and at the transition board. I know it is very difficult when there are potential job losses in one’s constituency, but the reality is that the model was not working.

Before I give way to the hon. Member for Croydon Central, let me say that Opposition Members constantly want harder, greener net-zero policies, and this is what happens when we flow those through. Customers—end users—want cleaner, greener steel that is made in electric arc furnaces, and this is the outcome of that demand. The reality is that, without the support, there would have been a high risk of Port Talbot and Tata no longer producing steel in the constituency of the hon. Member for Aberavon (Stephen Kinnock).

[Ms Ghani]

I will go on to reference that, but not all unions subscribe to the plan, as the hon. Member knows. It was put forward by a collective, but not by all of them. Tata has been clear that keeping open a blast furnace for a very narrow period of time while opening up electric arc furnaces, which will provide the certainty that we need so that we can use scrap steel in the UK, is neither credible nor financially viable. Keeping a blast furnace open also creates difficulties around security and health and safety.

The negotiations continue, and a consultation is taking place. I was asked about what I am doing to ensure that Tata is observing the parameters of that consultation. The transition board is in place, and our focus is on ensuring that the consultation is as wide and deep as it can be, and that the transition board can do the job that it was set up to do, with huge sums of money.

I have already mentioned, and I cannot reiterate enough, the threat that the Port Talbot plant was under. We recognise the vital importance of the steel industry to the community’s heritage and identity. As I have mentioned, the Government have committed £500 million —the biggest sum ever invested in the steel sector—as part of a total investment of £1.25 billion to ensure the future sustainability of Port Talbot steel. That is what we have been able to do, and we should reflect on that. The investment is a huge step towards fortifying UK steel. Sustaining the blast furnaces would entail significant additional losses for the company and compound its current issues. Moreover, as the hon. Member for Llanelli knows, the UK’s blast furnaces, such as those in Port Talbot, are approaching the end of their operational lifespan.

[Stephen Kinnock]

The Minister keeps saying that the blast furnaces—plural—are reaching the end of their lifespan. Yes, everybody agrees that blast furnace No. 5 is very close to the end of its lifespan; that part of the heavy end, with the coke ovens, should shut down, because the investment does not wash its face. The lifespan of blast furnace No. 4 is until 2032. It does not require that additional investment. I would be grateful if the Minister would stop saying that both blast furnaces are reaching the end of their lifespan.

[Ms Ghani]

The hon. Gentleman has been at the same meetings as I have, so he knows that the blast furnaces cannot be going if we are to transition in a period of time to having the electric arc furnaces up and running. However, I know that conversations are taking place with the unions, because I spoke to them this week. They are continuing to put their case forward, which is why a consultation is taking place. The hon. Member also knows that we need to give those conversations time to be followed through.

[Stephen Kinnock]

On a point of information, the multi-union plan is based on a 1.5 million tonne electric arc furnace. Nobody is denying that electric arc furnaces should not be in the mix. We fully support an EAF. We need a 1.5 million tonne EAF, running alongside blast furnace No. 4, not least because that blast furnace could then produce the iron ore-based metallics that are a vital part of sweetening the mix for the electric arc furnace. That would allow us to continue to deliver the current customer portfolio and be ready to embrace the opportunities of the future. I urge the Minister to recognise that we want an electric arc furnace; it is just that a 3 million tonne electric arc furnace is madness.

[Ms Ghani]

Three million tonne electric arc furnaces do exist in other parts of the world; it is not a unique capacity of arc furnace. I spoke to the unions on Monday, so I know that they are continuing to put their plans forward. Let us see what happens in the next few weeks.

I think everyone recognises that a transition has to take place. We have talked not only about supply chain resilience, but about how we can use scrap steel in electric arc furnaces as technology moves forward. Tata has confirmed that it will observe 90% of its supply chain contracts.

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[Ms Ghani]

We cannot force Tata. We put the support package in place when Tata said that it was struggling and making losses of over £1 million a day, but we cannot insist that Tata continues. We have provided an offer of support, and we want to ensure that the least amount of people are impacted, that the transition board provides support for those impacted, that supply chains continue to be resilient, and that any decision Tata takes to transition is one that meets the framework it puts forward. For example, if Tata plans to continue with its plan for a 3 million tonne capacity electric arc furnace by 2027, we need to ensure that all the milestones are met.

I want to touch on the issue of procurement, which we really have to address. First, less than 1% of UK steel is needed by the defence industry, and it has nothing to do with Port Talbot. This Government have implemented the procurement pipeline, which I was committed to doing when I became the steel Minister, to encourage our steel producers to access more contracts. In the last reporting year, there was an increase in the value of UK-sourced steel, from £97 million to £365 million. It is important to put that on the record, because Ministers say that they will try to increase UK procurement and we have most definitely done so.

I am worried that we are going to run out of time. The reality is that without our support there would have been a serious conversation fundamentally about the loss of 8,000 jobs at Port Talbot. I appreciate that the Opposition cannot understand the realities of business, but under Labour employment in the UK steel industry was cut back by more than half, or 40,000 jobs. Obviously, the Opposition do not appreciate the number of jobs that we hope to have saved.

We understand that Tata’s announcement will come as a heavy blow to the people of Port Talbot, but I recognise that everyone present accepts that we cannot stop the clocks. Technology has moved on. There has to be a transition, and this is a transition in which the majority of jobs will be supported with a substantial sum of money, and of course by the transition board as well. The transition we are talking about is one that enables us to adopt new technologies, with even more allowed to be adopted further down the line. It prevents the further loss of profit and prevents a dependence on imports going forward because we can use scrap steel within our own economy.

I assure the hon. Member for Llanelli that we are committed to working with Members throughout the House to realise a brighter future for our steel-making industry. If the options proposed by Opposition Members—whether it is the £28 billion or the £3 billion—were seen as serious and credible, I am sure that Tata would have taken heed of those support packages. Obviously it thought either that they were not credible or that they would not enable it to continue to do what it wanted—to transition to electric arc furnaces—and that they could have meant even more job losses in Wales and across the UK.

[Stephen Kinnock]

Will the Minister give way?

[Ms Ghani]

This is the last intervention.

[Stephen Kinnock]

The Minister is being generous in giving way. She said that the Tata plan would enable us to be open to new technologies. In fact, the opposite is the case because the 3 million tonne electric arc furnace negates the possibility of direct-reduced iron capability, of an open slag bath furnace and of a plate mill; the plan is closing down routes to other technologies, not opening them up.