The UK’s steelmakers need state aid for a green transition

Tata Steel UK, a subsidiary of the Indian conglomerate, and the Chinese Jingye Group, the owner of British Steel, continue negotiations with the UK’s government about financial support for the green transition. Financial Times writes about it.

Companies have warned that without help they will be forced out of business, leaving the UK the only major economy without primary steelmaking (making steel from iron ore).

The companies operating the UK’s last four blast furnaces are seeking support to cover the high costs of switching from traditional, energy-intensive production to greener alternatives to reduce carbon emissions. Analysts estimate that the decarbonisation of Tata Steel’s Port Talbot plant alone will cost around £2bn ($2.3bn). Jingye also asked for short-term support to help its business cope with a spike in energy prices and carbon costs.

More than 8,000 jobs are at risk in Port Talbot and British Steel (for the latter, the majority is in Scuntrop), and thousands more in the supply chain, the publication notes.

Producers noted that in order to decarbonize other industries, in particular, construction, the UK must first decarbonize the steel industry.

The steel sector is the UK’s biggest industrial carbon emitter and the Climate Change Committee, the government’s independent advisory group, said that emissions must be close to zero by 2035 if the 2050 net-zero pledge is to be met.

In addition to state aid, representatives of the steel sector, before making investments, insist on policy certainty during the green transition, as well as clarity on future supplies of electricity and hydrogen. Union representatives point to the significant support given to the industry by other European governments such as Germany and France.

At the same time, the British government faces a difficult choice, experts note. If support is withdrawn and the blast furnaces close, the UK will be the only modern economy without its own primary steel production. If the decision is positive, there are doubts whether the funds will really be used for the green transition.

Tata Steel CEO T. V. Narendran warned that time is running out to make the business stable given energy prices. Helping Port Talbot transition to alternative technologies and support production requires significant investment and political support from the government. British Steel declined to comment but confirmed it was in talks with the government to address the global challenges they face.

The British government, in turn, says that it recognizes the important role the steel industry plays in all areas of the economy, adding that supporting the industry’s green transition includes access to more than £1bn to help with energy efficiency, research and development and more.

As GMK Center reported earlier, Tata Steel will take a decision on its UK business based on the UK government’s response regarding financial support. The company is counting on a package of subsidies in the amount of £1.5 billion ($1.7 billion).