At Tata Steel in IJmuiden they are already applying for permits for the conversion of the factory to make steel based on hydrogen. At the Tata Steel factory in Wales .
What is the future of the British steel industry, and what role does the government play in this? The discussion about this has been heated in the country in recent days, following comments by Tata chief executive Natarajan Chandrasekaran. He said last Thursday against the Financial Times that within a year there must be agreements with the British government about financial support for greening the factory, otherwise closure would be an obvious choice. Tata Steel and the government have been talking about aid for two years, but so far have been unable to resolve it.
According to him, Tata Steel in Port Talbot, the largest steel factory in the country with about 4,000 employees, has enough concrete plans for greening: it wants to close the polluting blast furnaces and replace them with installations that melt down scrap. Although this process produces lower-grade steel, it emits much less CO2 from. At present, the steel industry – which mainly consists of the Tata Steel plant and a British Steel plant in England – is responsible for 2.6 percent of UK CO2emissions. Only: for the cover, Tata Steel is asking 1.5 billion pounds (1.7 billion euros) from the British government. The Indian company wants to make up for the other 1.5 billion pounds that would be needed.
Chandrasekaran’s comments have sparked wider debate about UK support for the steel industry. In recent days, unions and the Labor opposition have emphasized once again that they would have come up with a concrete plan for the steel industry long ago. In many European countries, agreements are now being made with sectors such as steel and chemicals, for example to start producing on the basis of hydrogen. In the Netherlands, Tata Steel and the government are still a long way from deciding how large the contribution should be from the state, but it is in any case clear that there is a willingness to pay.
Remarkably quiet
Unions reacted vexed to the ‘shocking intervention’ of the chief executive
The Conservative government in London, on the other hand, is remarkably quiet. There has been criticism about this for some time in the British business community. The government is said to be mainly involved in all kinds of scandals, making it difficult to make long-term agreements, it sounds like.
Or is the Conservative Party simply not inclined to support the – often very outdated – steel industry? Immediately after the statements of Chandrasekaran wells sources around the State Secretary for Business, Energy and Industrial Strategy, Kwasi Kwarteng, to make it clear in the British media that he absolutely sees the importance of the steel industry. But what matters most is what Prime Minister Boris Johnson’s successor will do – and that doesn’t necessarily look good, the FT noted delicately.
The two contenders to succeed Johnson, Liz Truss and Rishi Sunak, do not count as politicians naturally inclined to support the industry. Both call themselves ‘Thatcherian’, and it was Thatcher who, in the 1980s, had no interest in supporting a struggling steel and mining industry. Truss and Sunak also both have plans to cut government spending. Both have not yet responded to Chandrasekaran’s statements.
For the Labor opposition, they were an opportunity to once again emphasize their own love for the steel industry. Stephen Kinnock, Labor MP for the Port Talbot area, has been popping up in the media these days with a plan to invest £3 billion in the steel industry. According to the party, this must be preserved, partly because of its ‘strategic importance’.
Employment at stake
If there is no support at all, that would be a remarkable outcome. Steel is sensitive in the United Kingdom, as in many other European countries, because of the employment it provides. In relatively poor South Wales, where Port Talbot is located, Tata Steel is a large and important employer. The same applies to British Steel’s (Chinese-owned) factory in Scunthorpe.
Unions have reacted with anger to Chandrasekaran’s statements in recent days. A Community spokesperson spoke of a “shocking intervention” by Tata Steel, stressing that the unions knew nothing about it. The GMB union said the government must quickly show that it takes the steel industry seriously.
A transformation from Port Talbot to a scrap smelter would also be an opportunity for Tata Steel to finally make money in the UK. After the takeover of IJmuiden and Port Talbot in 2007, the group never succeeded in making the factory stable and profitable, partly because of the high operating costs of blast furnaces. The losses also often led to unrest in IJmuiden: for a long time the British and IJmuiden factories were part of one industry, called Tata Steel Europe. In IJmuiden there was a feeling that the money from the Netherlands was being used to cover the losses from Wales. The two factories have since been separated.
Also read this background piece on state aid for industry: Green industrial policy, is that a good idea?
The greening route on which Tata Steel is heading in IJmuiden is completely different from that in Wales. In IJmuiden the intention is to make new steel with hydrogen, which is something very different from melting down scrap. Exact sums of money that The Hague will match are also far from known here. A recent letter to parliament from the Minister of Economic Affairs, Mickey Adriaansens (VVD), showed that it will take at least another two years before concrete agreements are made.