British Steel blunder forced Scunthorpe blast furnace closure

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In the latest sign of the crisis surrounding the Chinese-owned group’s UK operations, British Steel was forced to close one of its two blast furnaces in Scunthorpe last year after using the wrong type of coal.

The disaster sparked initial fears among some government officials that British Steel was trying to sabotage its own vulnerable plant, but ministers have since been assured that the shutdown was due to a management error.

The revelation comes as part of British Steel has abandoned plans to restore steelmaking on Teesside. A government-backed restructuring Company operations to move to greener forms of production.

Initial plans for the company, owned by China’s Xingyi, called for one in Scunthorpe and one in Teesside, but people familiar with the situation confirmed the aim is now to build two at the Lincolnshire site.

Tees Valley Conservative Mayor Lord Ben Houchen claimed the Labor government opposed the idea and instead supported the concentration of new British Steel electric arc furnaces at its existing Scunthorpe plant.

“It’s disappointing,” Houchen told the Financial Times. “Clearly there has been collusion with the Labor government and the unions not to come to Tayside.”

Jonathan Reynolds’ ally, the business secretary, said the future structure of the business was a commercial decision for British Steel, but noted that Teesside was proving to be an attractive location for inward investment.

The company’s decision to scrap plans to build a “green” reactor on Teesside and another at its main works in Scunthorpe was first reported by the Sunday Times.

Problems arose last year at British Steel’s “Queen Anne” furnace in Scunthorpe after it started importing coking coal after shutting down its coke ovens in 2023.

According to several people familiar with the situation, the engineers mistakenly supplied coke that was a mixture of both “low-quality and low-quality” and caused the furnace to become inactive.

The shutdown sparked initial concerns in the government that British Steel might try to damage its own plants to justify shutting down its UK operations, according to people briefed on the matter.

But a government insider said Reynolds believed it was for “inefficiency and cost-cutting” rather than any malicious intent. Engineers misunderstood the complexities of the blast furnace the company claimed, a second person familiar with the situation said.

Discussions are ongoing between the government and the company on the scale of the support package to restructure its operations. British Steel’s latest accounts, filed last year, showed that Xingay had injected £100m of equity into the business in October 2023.

British Steel has made it clear it is seeking more than the £500m it agreed for Tata Steel’s plant in Port Talbot, Wales, to build an electric arc furnace. The government said it would invest £3bn, including £500mn for TataBritain’s steel industry in the next decade.

Union representatives said their priority was to keep the blast furnace open as long as possible. Electric arc furnaces are less carbon-intensive but employ fewer people, and the transition to greener forms of steelmaking could potentially put half of the 4,500-strong workforce at risk.

Alasdair McDiarmid, assistant general secretary of the community union, whose members include steelworkers, said it was “essential to have two blast furnaces at Scunthorpe to facilitate the transition to new technology on site”.

“This is a priority for us as a union and is at the heart of the proposals we have presented to Xingay and we now await the company’s response.”

British Steel declined to comment on why the Queen Anne furnace went down but said two of its furnaces were now operating. It continues to purchase “raw materials for making iron and steel”.

The company, it added, remains in “ongoing discussions with the government about our decarbonisation plan and the future operations of our UK business”. Although progress continued, “no final decision has been made,” it said.