UK steel market: importers to brace themselves

The British steel industry is undergoing a complex transformation caused by the need to replace outdated facilities. This painful process is accompanied by a decline in production volumes. At the same time, the main consumption sectors are expected to show positive dynamics in 2025. This creates prerequisites for increasing foreign supplies of steel products.

Import dependence as a diagnosis

The UK market has a pronounced dependence on steel imports. In 2023, smelting amounted to 5.6 million tons, consumption – 7.6 million tons. But local steelmakers met this demand only partially. They accounted for 3.04 million tons of sales. The remaining 4.46 million tons were taken by foreign suppliers. These were mainly India’s Tata Steel and China’s Jingye, which own the largest British steel mills.

Importers were able to grab such a big piece of the pie not only because a significant part of local steel products was exported. The main reason is the narrow product line of British steel mills.

As an example, we can take cold-rolled flat-rolled steel of category 2 used in the production of parts for cars and household appliances. It is produced in the UK only at one of Tata Steel’s plants, and in very limited quantities. Therefore, the company’s management decided to discontinue commodity sales and to divert all the product it receives for further galvanizing production.

In this regard, the Trade Protection Authority (TRA), at the suggestion of traders, has removed import quotas on cold-rolled products to avoid price hikes for consumers. Tata Steel supported the initiative.

Another characteristic point. In 2024, the British metal consumption has dropped significantly. The production of passenger cars fell by 13.9% – to 779.58 thousand units. The volume of construction work on new projects had a positive trend (year-on-year) only in November.

Nevertheless, overseas shipments of steel products to the UK grew by 25.8% year-on-year – to 6.2 million tons. This was aided by a 29% drop in domestic steel production to 4 million tons. The main reason was the cessation of pig iron smelting at Tata Steel’s Port Talbot steel mill, the country’s largest. The blast furnaces at this plant stopped permanently in September 2024.

The big bailout: implications

Pig iron smelting in Port Talbot was not just stopped for environmental reasons (the government calculates that it will reduce annual CO2 emissions by 1.5% nationally). The government’s transformation strategy is to switch to a full supply of locally sourced raw materials for the steel industry. Iron ore needed for blast furnaces has to be 100% imported. Whereas for scrap metal, which serves as raw material for electric steel furnaces (ESPs), there is huge potential.

According to the Department of Business and Commerce, the annual scrap harvest in the UK is now around 11 million tons, with domestic scrap consumption of 2.6 million tons. The idea is clear. Instead of exporting surplus scrap and buying finished steel abroad – produce this steel at home using our own resources. Having excluded raw material dependence from the equation, as in the case of blast furnace-converter production.

In addition, electric steelmaking allows British steel mills to significantly expand their product line. And thus increase their share of sales in the domestic market. Again, by reducing imports of analogs, which are now critical.

This is why the blast furnaces at Port Talbot will be replaced by ESP. Construction of the electric steelmaking shop will take 3 years, with commissioning scheduled for the end of 2027. The cost of the project is £1.35 billion, of which £500 million is being invested by the British government.

Yes, this is the same state support for decarbonization of the industry, the need for which Ukrainian metallurgists are constantly talking about. That is why without access to subsidies and grants from the government or international funds we will not be able to compete with European steel producers.

But let’s return to the British steel industry. It is a bit more complicated with the Scunthorpe mill, part of British Steel. Here too, the government has offered £500m of funding to the owner, China’s Jingye, to switch to electric steelmaking. But this project is more expensive than in Port Talbot – about £2 billion. That is, if the government’s shareholding there is 37%, in Scunthorpe it would be only 25%. So the PRC investors turned it down. And now they have three options on the table.

The first is to close the blast furnace plant from June, without building a replacement ESP. This is unless the UK government agrees to provide £1 billion for the project, as Jingye is asking for. And in doing so will continue to demand reductions in greenhouse emissions. In that case, rolling production at British Steel’s mills will be supported by imported semi-finished products. Probably from China.

The second one envisages the cessation of pig iron smelting from September, with the simultaneous start of construction of an electric steelmaking shop. This is if the state will finance the project in equal share with a private investor. The third option assumes continuation of the blast furnace shop operation for an indefinite period of time, with the prospect of closure in the future.

Prospects for 2025

While the government has not made a final decision, negotiations continue. In an April statement to the media, Prime Minister Keir Starmer did not rule out the possibility of nationalizing British Steel’s operations.

However, this scenario seems the least likely. Since then the authorities would have to either give up on achieving zero CO2 emissions in the industry or fully finance the Scanthorpe project from the state budget. Obviously, both options are unacceptable for Downing Street. The parties will therefore have to find a compromise on funding.

This means that the blast furnaces at Scunthorpe will still stop this year. And, consequently, steel production will fall further. Whereas steel consumption promises to recover from last year’s decline.

The British association “Society of Motor Manufacturers and Traders” (SMMT) forecasts an increase in car production in the country by 7.6% in 2025. The SMMT calculates that the positive trend will be stable in the medium term. This will ensure a steady growing demand for flat-rolled steel products.

There is good news for overseas long steel producers too. The Construction Products Association (CPA) expects construction volumes to grow by 2.1% this year and 4% in 2026. The driver will be the private housing sector. Here, volumes will increase by 6% in 2025 and 8% in 2026. This will be ensured by the inflow of private investment. They will increase by 3% in 2025 and by 4% in 2026.

Separately, it is necessary to note the prospects for metal consumption in the sphere of offshore wind energy, which the UK is intensively developing. According to government estimates, 25 million tons of steel, 1 million tons per year, will be needed to build floating wind farms under the Clean Power Plan until 2050. This is mostly sheet steel.

At the same time, local companies can now produce only half of the required product mix. Thus, the potential for importers is 12.5 million tons, or 500 thousand tons per year. In money terms, the volume of steel supplies for these purposes is estimated at £21 billion. £10.5 billion of this can be received by foreign suppliers. That is £420m annually.

Protecting the domestic market

Steel imports into the UK are mainly ordered by private companies. The public sector favors local producers. Between 2023 and 2024, 70% of all steel products purchased by government departments on budget were domestically produced. Rail infrastructure operator Network Rail, a state-owned company, purchases 90% of the steel it needs from British mills.

Obviously, it makes sense for the Ukrainian Cabinet of Ministers and Parliament to use this experience. In Ukraine, the degree of mandatory localization in public procurement for 2025 is only 25%. And this requirement applies only to engineering products.

In February 2025, the Procurement Act and the National Procurement Policy Statement (NPPS) came into force in the UK. They are designed to further strengthen the role of local manufacturers in the fulfillment of government orders. This includes the steel industry.

Downing Street has not forgotten about classic tariff protectionism. In the middle of last year, the Department for Business and Trade extended import duties on 15 categories of rolled steel products until July 1, 2026. Nevertheless, import growth between 2023 and 2024 shows good opportunities for overseas steel suppliers even in this environment – thanks to the strength of the British pound sterling against the US dollar.