The UK government’s new strategy for steel is emerging as a two-pronged bet on scrap steel and green hydrogen. Business Secretary Peter Kyle has backed electric arc furnaces (EAFs) to recycle scrap, while “considering” a hydrogen-based plant to preserve primary steelmaking.
This complex, high-tech plan is an attempt to solve two problems at once. First, the EAFs at Scunthorpe would replace the “carbon-heavy” blast furnaces, helping the UK meet its net-zero targets and securing the future of the state-controlled plant.
Second, the proposed Direct Reduced Iron (DRI) plant would address the major drawback of EAFs. By using “clean hydrogen” to process iron ore, it would create a feedstock for the EAFs, allowing the UK to “maintain primary steelmaking capacity.”
This dual strategy is, however, fraught with risk. The DRI component is considered “financially dubious” by industry sources. Furthermore, the entire plan must be funded by a £2.5bn pot that has already been significantly depleted by “hundreds of millions” in bailouts for British Steel and Liberty Steel.
Unions are also “cautious,” fearing the EAF transition will lead to thousands of job losses, as it did at Port Talbot. The government’s December strategy will need to prove that this ambitious bet is both financially and socially viable.