Tata Steel’s blast furnace closures: Who saw it coming? And is UK steelmaking in ‘managed decline’?

Posted on 19 Jan 2024 by Tom St John

Tata Steel has announced that it will close blast furnaces at Port Talbot steelworks, putting nearly 3,000 jobs at risk.

The Indian-owned steel manufacturer rejected a trade union plan designed to keep its blast furnaces running. The company told workers’ representatives that it could no longer afford to continue production at the plant in south Wales, which was making a loss, and would hamper the completion of a four-year transition plan to greener production.

This leaves the UK on course to become the only major economy unable to make steel from scratch. Remarkable really, when you think back to the role that UK steel making played in the first industrial revolution.

Some saw this coming

Concerns were raised at the time, when back in September last year, Tata Steel and the UK government jointly agreed on a proposal for the largest investment in the UK steel industry for decades.

The proposal included a £500m injection from government, and aimed to lay the decarbonisation pathway towards globally competitive and sustainable steel making in Port Talbot.

Tata Group’s Chairman, N Chandrasekaran optimistically said at the time: “The agreement with the UK government is a defining moment for the future of the steel industry and indeed the industrial value chain in the UK.”

So, what made us question, will it come at a cost? Well, many made eerily correct predictions at the time of the announcement, saying that the plans will come at enormous cost. The worst possible outcome being that the introduction of greener technology at the site will result in as many as 3,000 job losses. Four months down the line, that’s exactly what has happened.

Port Talbot - Tata Steel shutterstock_2167688621

“This is a historic package of support from the UK government,” said  Kemi Badenoch, Business and Trade Secretary for the UK government, speaking to the BBC following the announcement in September.

“Without this investment we would probably have seen the end of steelmaking, certainly in this part of the country, possibly in the whole of the UK. The government has a transition plan in place that’s funded up to about £100m to make sure that people have skills to retrain and move on to other things if they don’t want to stay in the steel industry.”

Stephen Kinnock, the Labour MP whose Aberavon constituency includes Port Talbot, responded in an far less optimistic manner. He claimed that the new electric arc furnaces will result in more job loses than is necessary and will not produce the grade of steel required by Tata’s customer base.

He commented on the current situation by saying: “Everybody in the town is deeply disappointed and extremely concerned about this news.”

A bad day for Port Talbot

The shadow business secretary, Jonathan Reynolds, also lashed out at the government following the official announcement that came on Friday 19 January. He lamented the governments decision to provide Tata with funds to pay for its green transition plans without securing a guarantee on jobs, remarking that the government’s strategy was “£500m for 3,000 job losses”.

Port Talbot’s blast furnaces will shut down while the company builds electric arc furnaces, which make steel from recycled scrap, a greener and cheaper process. About 200 jobs could be saved, according to The Guardian, under a proposal to keep some of the site’s mills open, to roll steel slab.

Still, the decision is a huge blow for a town which depends so heavily on this factory; for its economy and the provision of jobs.

The Community and GMB unions had put forward a staggered transition plan designed to provide immediate protection for workers. Under those plans, the blast furnaces would have remained open during the transition, with at least one continuing to operate until 2032.

But Tata is understood to have told union representatives that the proposal was unaffordable given the huge losses that the factory at Port Talbot’s was suffering – reportedly estimated at £1 million a day.

Rishi reassures, but is steelmaking in “managed decline?”

The industry trade body, UK Steel, said earlier this year that 2024 was a “crossroads” for the British steel industry, stating that it could either “enjoy a renaissance or continue in managed decline.”

The Prime Minister, Rishi Sunak stated, in an interview with Sky News: “We are absolutely committed to steelmaking in the UK, and that’s why the government provided half a billion pounds to support Tata.

“The alternative, by the way, was that the entire plant would be closed, and all 8,000 jobs would be lost. But the government worked with the company and provided the money (that was needed.)

“We did this because we care about those jobs and the future of steel making in Wales and the rest of the UK.”

The figures make fairly grim reading following the closing down of Port Talbot’s two blast furnaces. Sadly, this a milestone in a decades-long decline that has seen production fall from 25 million tonnes in 1971 to 6 million tonnes, while employment in the sector has seen a huge drop from 250,000 to just under 34,000, according to Office for National Statistics (ONS)

Port Talbot - Tata Steel shutterstock_2380716633

The UK’s only other blast furnaces, at Scunthorpe, are also due for shutdown. In a similar situation to this one, that site could be facing a potentially lengthy transition process to electric arc furnaces.

As mentioned, this would leave the UK as the only G20 country unable to make steel from raw materials. An upsetting state of affairs, and a sad day for South Wales, who with Sheffield, Birmingham, the North East and other regions of industrial Britain, share a rich and proud steelmaking history.

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