High energy costs in the UK have exposed the steel industry to decades of low growth and competition from imports made cheaper by lower energy costs in other countries.
The Greensteel initiative from Sanjeev Gupta’s Liberty House Group promises to be a major game changer, and should the sector succeed in getting the government to level the energy playing field, UK steel could find itself significantly healthier.
Nick Peters spoke to Jon Bolton, CEO of Liberty Steel, about Greensteel.
Jon Bolton: The initial thinking around Greensteel was to do with energy costs, but it was actually driven by trying to lower the CO2 that’s generated when you manufacture steel.
In a traditional steelmaking environment, you are producing roughly two tonnes of CO2 for every tonne of steel you make.
You can drop that by two-thirds with electric arc steelmaking because you’re recycling scrapped steel, and if you power that from renewables, you can virtually get to zero. And so, if you ask Sanjeev [Gupta] about his ambition here, he will talk about low CO2.
Of course, products that you produce through the blast furnace route are also very important to the manufacturing sector. And in that process there are also ways in which you can drop CO2 emissions; for example, through some of the good work that Tata Steel is doing to reduce CO2 generation.
But Greensteel also addresses the energy problem. The issues with electric arc furnaces have always been sourcing the scrap, and that the UK’s electricity is too expensive – 50% higher price in the UK than in say Germany or France.
If you generate using direct wire from a renewable source, then a lot of the distribution costs and some of the policy costs fall away, and that actually offsets the £17 per megawatt hour difference that is the challenge we in the sector face.
It must be galling to have an energy policy in this country that obliges massive users like yourselves to pay so heavily for decarbonisation. The government had a choice, and it chose to make life expensive for manufacturers. What have you been saying to government about changing that?
We’ve been talking to government about this for as long as I can remember. One of the fundamental principles of the new Industrial Strategy is to establish a competitive base in the UK for industry to grow from.
That competitive base means you’ve got to have a level playing field with your competitors, whether its electricity costs or business rates. That’s the fundamental argument in our sector deal discussions with government.
All the CEOs in the companies in our sector have said we’re going to invest more in the UK. We’re going to increase employment. We will increase the number of apprentices we employ, but in return we need this level playing field, plus support around our R&D.
If we leave the European Union without a deal, or with a very loose deal, would you be looking for direct subsidy, or state aid which is forbidden under EU rules?
We’re not looking for a hand out. We’ve been very, very clear. We want a levelling of the playing field and then the pressure absolutely should be on us in the industry to reduce the costs and compete, but from a position that is level with the rest of our competitors.
If you marry together the level playing field and the work you’re doing on Greensteel, that should give you a real competitive edge.
Yes. If you look at UK’s steel strategy and at Liberty Steel’s strategy, the two go hand in hand. We import 6.5 million tonnes of steel directly into the UK. We want to able to displace that using better technology, using the Greensteel strategy.
You say you are working closely with Tata and British Steel. To what extent are you also trying to get an edge over them?
We’re all operating in different sectors. Tata is very strong in high quality flat products. Long products are essentially sat with British Steel and then the specialty steels produced by Liberty. So we’re not really competing.
Can Greensteel techniques be used by them, or does it only work for the sector you’re in?
No, it works for them as well, it works for everybody. You’ve got to have a mindset, I think, to drive it. We don’t have a lot of sunk capital in existing steelmaking techniques
However, our steelmaking is electric arc furnace-based and it is probably more difficult for others to move into that space.
What is Greensteel?
Traditional steel is made by smelting iron ore with carbon in blast furnaces, in the process producing massive amounts of CO2. Greensteel is made by melting existing scrap steel in electric arc furnaces.
Currently, the UK imports about 6.5m tonnes of raw or semi-finished steel a year, while exporting 8m tonnes in scrap metal a year, most of it steel.
Greensteel offers the opportunity to reduce those imports and to recycle steel – and other metals, including aluminium.
Sanjeev Gupta, of the Gupta Family Group Alliance, has invested close to £1bn in the UK, in energy production and in electric arc furnaces.
Evidence of their intent came at the end of 2016 when Liberty House and GFG’s SIMEC energy division bought the UK’s last remaining aluminium smelter at Lochaber (near Fort William, in Scotland) and the two hydro-electric plants that feed it.
While Liberty is using some renewable energy sources in its UK steel network, it is not yet able to do so at its main steel recycling plant at Rotherham, but plans to do so in the future.
The company believes investments like these will ultimately turn the ailing UK metals sector around and make it competitive once again on the global stage, while at the same time achieving very large reductions in CO2 production.