British Steel mill’s future up in the air

British Steel and the Jingye Group, the China-based owner of the steelmaker, have begun to consult on the closure of their two blast furnaces and other steelmaking operations in the United Kingdom with relevant stakeholders.

The winding down effort will focus on the closure of two blast furnaces and adjacent steelmaking operations in Scunthorpe, England, and a reduction of steel rolling mill capacity there.

Jingye, which purchased British Steel in March 2020, has invested more than $1.5 billion to maintain operations in Scunthorpe amid what it calls ongoing production instability and significant financial losses of around 700,000 British pounds ($905,000) a day.

The company lists capital projects involving a steel mast service center, a rail stocking facility and a new billet caster as examples of its willingness to invest.

Sky News reports that Jingye rejected a British government proposal to provide 500 million British pounds ($647 million) of financial assistance to convert the blast furnace/basic oxygen furnace (BOF) complex in Scunthorpe into one using recycled-content electric arc furnace (EAF) technology.

India-based Tata Steel, owner of the other BOF complex in the U.K., accepted a similar amount of support from the British government and has started its BOF-to-EAF conversion process in Port Talbot, Wales.

“Sarah Jones, the [Minister of State for Industry], told a committee of Members of Parliament on Wednesday afternoon that an offer had been made by the government earlier this week, and it had been rejected by Jingye," Mark Kleinman of Sky News reports of Jingye’s willingness to accept a similar offer.

Sky News also reports Jones telling the Parliamentary committee, “We are still in talks with them at the moment.”

On Thursday, however, British Steel announced its entry into closure discussions, saying that despite its investments, the blast furnaces and steelmaking operations are no longer financially sustainable, citing challenging market conditions, the imposition of tariffs and higher environmental costs relating to the production of high-carbon steel.

“The company had sought support from the U.K. government for a major capital investment in two new electric arc furnaces," British Steel says in a March 27 news release. "However, following many months of negotiations, no agreement has been reached. As a result, the difficult decision has been made to consult with employees and to consider proposals to close the blast furnaces and steelmaking operations and reduce rolling mill capacity.

“In the meantime, British Steel will continue to work with the U.K. government to explore options for the future of the business."

Nonetheless, the firm says it began to consult with its employees and their unions immediately, and will present three options or scenarios, all of which entail layoffs and closing the blast furnaces in Scunthorpe.

The scenarios list three different timelines, with the furnaces being idled either in June, September or "sometime beyond September 2025.”

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"We understand this is an extremely difficult day for our staff, their families and everyone associated with British Steel, but we believe this is a necessary decision given the hugely challenging circumstances the business faces," British Steel CEO An Zengwei says.

“We remain committed to engaging with our workforce and unions, as well as our suppliers and customers, during this time.”