UK steel industry can flourish, but only if government makes right decisions - report

The UK steel industry could have a very bright future, and could once again become a world leader, but only if the UK government moves fast to support innovation and cut costs, and insists on assurances for the future of Port Talbot in all takeover discussions. That is the call from a team of four industry experts, three from Swansea University, in a new report.

The experts show that UK demand for steel far outstrips supply – only 40% of the steel used in the UK is produced here – and market conditions are currently strong, due to a drop in the value of sterling.  This provides, they argue, “an excellent opportunity to secure the future sustainability of the UK steel industry”.

The team warn, however, that if the UK government does not act, there is a real danger that it is overseas companies who will benefit from these opportunities, which would be a major threat to the future of the UK steel industry.

300 x 202Picture:  new cars; the UK market for cars, and thus steel to make them, is growing fast

Read the steel report here

The authors are experts and former industry senior managers based at Swansea University, which has a long history of close collaboration with the steel industry in its South Wales heartland, along with a fellow steel expert from Warwick University. 

The report comes at a time of continued uncertainty for the steel industry, with Tata Steel having suspended its planned sale of its UK business, and the wider uncertainty in the wake of the UK referendum vote to leave the EU. 

Against this uncertain backdrop, the report, drawing on the team’s knowledge of the industry in the UK and internationally, gives a clear message to the UK government.   

The UK Government’s proposed stake in any new steel business resulting from the current discussions, while welcome, is not enough. Government also needs to:

  • Insist on assurances, in any sale of Tata’s UK operation, that Port Talbot’s primary steelmaking plant, along with its downstream units, will be retained as a whole
  • Devise and commit to a long-term strategic plan for the UK steel industry
  • Cut the biggest costs facing the industry:  energy and business rates
  • Use its procurement power to encourage the construction sector to adopt low-carbon steel-based technologies
  • Support the asset improvement plan presented to the Tata board
  • Support innovation, research and development, including considering the long-term potential of electric arc furnaces for recycling steel

300 x 456‌Picture:  a 21st century industry; low-carbon technologies such as solar panels and wind turbines require steel

Brian Edy, Senior Industrial Fellow at Swansea University, and former senior manager in the steel industry, said:

"The UK steel industry has a bright future, and can be a great British success story, but only if the government moves quickly and makes the right decisions.

There is a huge opportunity for the UK steel industry, as demand for steel products – from cars to packaging to new construction materials – will remain strong.  The question is whether it will be steelmakers here or overseas who make the most of it.

Port Talbot, which is back in profit, is central to a successful steel industry in the UK.  That is why one of the vital steps we are calling on the government to take is to insist on assurances on the future of Port Talbot in any takeover deal. 

The UK government showed over the Hinkley Point plans that it was willing to intervene and insist on safeguards, where it believed it to be in the national interest.   Our steel industry is a national asset.  It can flourish, or it can perish.  It all depends on the steps we take, or fail to take, in the coming weeks." 

Professor Sridhar Seetharaman, steel expert and Chair in Low Carbon Materials at Warwick University, described the contribution that electric arc furnaces (EAF), which produce steel from scrap, could make,in the long term:

 “Steel made through remelting of scrap in electric arc furnaces (EAF) is flexible, low-energy and has a low capital cost.  In the USA it has replaced blast furnace steelmaking in many product streams, including some value-added products, thanks to the ability to dilute the harmful residuals (copper and tin) with iron reduced by cost-effective shale gas.

Scrap-based steelmaking could have a wider role in the UK too, starting - like it did in the US - with low-end product, then, as the industry gains experience with handling the residuals, move up the value chain.

However, this will take time and require significant infrastructural changes at a national level: electric power availability, scrap revert agreements, and - for producing value-added products – direct reduced iron (DRI) and cheap natural gas.  In the meantime, value-added strip for the domestic automotive and construction industries can only be supplied through the integrated blast furnace route.”  

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Picture:  inside a blast furnace:  complex modelling of particles' behaviour by Swansea University experts helps improve the efficiency of the Port Talbot plant. Credit:  Marc Holmes and Steve Brown.

Professor Dave Worsley, research director at Swansea University’s College of Engineering, who works closely with the steel industry, said:

"Steel is a 21st century industry, developing tomorrow’s technologies.   UK steel can not only survive, but thrive.   It can be transformed into a leading-edge zero carbon industry, for example developing carbon positive products using locally-generated waste products as a chemical. 

This future is already starting to happen in the work we are carrying out at Swansea University. 

Wales can continue to play a leading role in steel, at the heart of a vibrant and innovative 21st century industry.  To do so it must focus on making high-value products.  This is only possible with support for innovation, from government at Wales and UK level”.

 

Key points of the report: 

Steel must be seen once again as a national asset: this is the case in other countries such as Japan and Korea which benefit from procurement policy favouring domestic steel and from support for innovation.   Steel is an asset because it is a foundation industry, supplying much of the UK manufacturing sector.

Innovation, research and development are the key to success: this was the case in the past, when British steel was a world leader, and it is even more so today.   The labs and the plants need to be close to each other: the top 5 steel-producing companies globally have substantial R&D facilities within a few kilometres of their largest manufacturing sites.

Port Talbot - now back in profit - and its downstream units are essential to a successful UK steel industry:  Port Talbot has turned the corner and is now performing above the levels in the local transformation plan rejected by the Tata board as being unachievable.  It has a viable future in the hands of an owner with a long-term vision.  The two blast furnaces must be retained, though it needs investment to introduce more process improvements, and to enable it to make more tailored products for different sectors.

Make high-value steel products, not just steel:  the future lies in value-added tailor-made products, made for a specific purpose, not bulk volumes of steel slab.  Examples include lightweight steel for more fuel-efficient cars, already being developed with Swansea expertise, and protective armour for the defence industry.  Plants producing only steel slab are not sustainable, as the recent closure of SSI’s plant at Redcar showed.

Prospect of a joint venture between Thyssen Krupp Steel and Tata could be a serious threat to the industry’s future: TKS appear to be already looking to reduce their steelmaking capacity.  Were a joint venture to go ahead without assurances over the future of Port Talbot, it is therefore possible that TKS could end primary steelmaking at Port Talbot, and focus on meeting UK demand with steel produced in their other factories.  This would not only be a devastating blow for Port Talbot; it would also be the end of any prospect of a sustainable, successful UK steel industry.

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Picture: Steel seen at the nano scale.  The Advanced Imaging of Materials team at Swansea University have developed new  steels which are strengthened by tiny nano-level structures, which are the same length as a human fingernail grows in 1 second.   These new steels are now being used to make a new generation of lighter and more efficient cars.

In figures:  demand for steel, and the decline in investment

  • 60% - amount of steel used in the UK which is imported
  • 50% - increase in demand for steel products in car manufacture 2015-17, according to the Society of Motor Manufacturers and Traders
  • 40 years old - age of the National Grid transformers, built with electrical grade steel, which will soon require upgrade across the nationwide network
  • Half  - the level of investment in Port Talbot compared to the industry norm, according to a study by a leading Industry consultant
  • From 900 to 150 - cut in staff working in research and development in the UK steel industry

Find out about Swansea University's work with the steel  industry