British Steel owner preparing to cut as many as 2,000 jobs, report says


China’s Jingye Group said to be considering move as part of switch to using greener electric arc furnaces


Sarah Butler
@whatbutlersaw

Sun 22 Oct 2023 

A worker at British Steel’s Scunthorpe plant in north-east England Photograph: Lindsey Parnaby/AFP/Getty Images

British Steel’s Chinese owner is preparing to cut as many as 2,000 jobs as it battles losses believed to be running at £30m a month, according to reports.

The potential cuts, which amount to almost half of the Scunthorpe-based firm’s 4,500 workforce, are part of a switch to greener steel production using electric arc furnaces instead of polluting blast furnaces, which use coke to melt iron ore.

The cuts, first reported in the Sunday Times, are still under consideration and it is understood that no firm decision on the restructure has been made.

The UK government has offered the company’s owner, Jingye Group, £300m to support a shift to electric arc furnaces, but negotiations on finalising the deal are understood to be ongoing. The cash was reportedly linked to protecting jobs and a £1bn investment by the Chinese group, and it is not clear how job cuts might affect the government’s investment.

The government recently agreed a £500m support package for Tata Steel to fund the transition to electric arc at the Port Talbot steelworks in Wales.

A spokesperson for the Department for Business and Trade said: “We continue to work closely with industry, including British Steel, to secure a sustainable and competitive future for the UK steel industry.”

The UK’s steel industry – which is one of the most difficult to decarbonise because of its huge energy requirements and the use of coking coal in iron smelting, a process that emits carbon dioxide directly – is suffering from rising costs and competition from cheap steel made in China and elsewhere.

A British Steel spokesman said: “While decarbonisation is a major challenge for our business, we’re committed to transforming British Steel into a green and sustainable company providing long-term, skilled and well-paid careers for thousands of employees and many more in our supply chains.

“As part of our journey to net zero, it is prudent to evaluate different operational scenarios to help us achieve our ambitious goals and we are continuing to assess our options.”

The restructure emerged after British Steel, which was rescued from collapse by Jingye in 2020, admitted in an industry meeting with other organisations last week that it was losing up to £30m a month, according to the Mail on Sunday.

Steel production has been hit by the increased cost of carbon credits as well as much higher energy prices after Russia’s invasion of Ukraine.

The company did not confirm its financial position, but admitted it was struggling with a “temporary production issue” and said it was “taking decisive action to minimise the potential impact on customer orders”.

It said in a statement: “The matter will be resolved at the earliest opportunity. We are manufacturing iron and steel and continue to work closely with our customers to satisfy demand and ensure they get the high-quality products they require.”