Posted on 28 Mar 2025
British Steel says it will consult with workers and trade unions on the closure of its two blast furnaces, steelmaking operations and a reduction of steel rolling mill capacity in Scunthorpe, Kallanish learns.
It says challenging market conditions and significant ongoing financial losses have made it unsustainable to continue operating the blast furnaces and wider steelmaking operations.
It adds it will engage with ministers to seek options for support on transition to electric arc furnace steelmaking. However, this news comes the day after British Steel rejected a government funding offer, believed to be £500 million ($644m).
The steelmaker says following many months of negotiations, no agreement with government has been reached. As a result, the “difficult decision” has been made to begin a formal consultation with employees and unions from 27 March.
It adds that since 2020, British Steel owner Jingye has invested more than £1.2 billion to maintain operations amid ongoing production instability and significant financial losses of around £700,000 a day. Despite this, the blast furnaces and steelmaking operations are no longer financially sustainable due to highly challenging market conditions, the imposition of tariffs, and higher environmental costs relating to the production of high-emission steel.
The consultation will propose three options, including the closure of BFs, steelmaking operations and Scunthorpe rod mill by early June 2025, or BF and steelmaking operation closure in September. The third proposal is the BF and steelmaking operation closure at a future point beyond September.
British Steel chief executive Zengwei An says: “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."
In its most recent financial report, the firm announced an eightfold increase in pre-tax losses, noting its ageing and high-cost assets. The company has experienced BF operational issues for some time, with losses growing yearly.
In a statement emailed to Kallanish, business and trade secretary Jonathan Reynolds says: “I know this will be a deeply worrying time for staff and, while this is British Steel’s decision, we will continue working tirelessly to reach an agreement with the company’s owners to secure its future and protect taxpayers’ money.”
He adds there is a bright future for UK steelmaking, given the government’s commitment of up to £2.5 billion to rebuild the sector, and the upcoming Plan for Steel.
The government has made clear that any offer of grant funding for the company must be the right deal for taxpayers. British Steel is said not to have met standard conditions guaranteeing respect for workers, support for the local area and ensuring the company’s long-term commercial viability.
UK Steel director general Gareth Stace called the move by British Steel a “gut punch to UK steelmaking” that will have “a profound impact felt throughout the British economy.”
“The end of steelmaking at British Steel would mean we have a major gap in capacity to meet the future demand of the nation and will be an irreparable break in the armour of national security,” he adds. “Government must get back to the negotiating table.”
The UK government responded on Thursday by saying it hopes British Steel returns to negotiations, but it did not rule out nationalising the steelmaker (see separate story).
Source:Kallanish
