British Steel investor looks to Teesside for investment

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Shadrach   in Alternatives

Last updated: 26 January 2020, 06:04 GMT


British Steels Chinese buyer is considering building a replacement metals recycling furnace on Teesside, a move which might bring steelmaking back to a neighborhood that has suffered decades of commercial decline.

Within the week, Jingye reached out an agreement with trade unions on new terms of employment as a neighborhood of his proposed botched factory switch, which could entail £ 1,2bn of investment but also up to 500 job losses — about 10 per cent of the workforce.

The Chinese conglomerate hopes to conclude its takeover of the UKs second-largest steelmaker by the end of next month. It is looking at the possible installation of an electric arc furnace at one of the companys smaller factories in Teesside, north-east England, according to people aware of the plans.

If the proposal goes ahead, it would herald the return of crude metal production to a region with a proud industrial heritage, but whose 170-year history of iron and steelmaking ended when the nearby Redcar blast furnace plant shut in 2015.

The closure caused 3,000 job losses and left behind vast tracts of despoiled land at what has been described as the UKs biggest regeneration site.

Securing the future of British Steel is a priority for the UK government, in line with prime minister Boris Johnsons pledge to level up regional economies. Many former Labour heartlands with manufacturing legacies, including Redcar, turned Conservative in last years general election for the first time in decades.

The Teesside beam mill processes basic metal, supplied by British Steels main plant in Scunthorpe, into products for the construction industry and employs 400 people. An EAF would make it capable of manufacturing its own primary material.

Unlike blast furnaces that produce virgin steel from raw materials, EAFs melt scrap steel and are smaller, less costly to build and more flexible. They also emit less carbon dioxide, but consume huge amounts of electricity.

This should reduce costs and maybe increase competitiveness.

said one person familiar with the Teesside factory.

However the new furnace would definitely not be intended to replace Scunthorpes blast furnaces, said one of the people aware of Jingyes thinking. Jingye declined to comment.

The Community trade union this week said that Jingyes investment plans would be transformational and secure British Steels long-term prospects.

Since it collapsed into insolvency in May, British Steel has continued to operate under the Official Receiver, an officer of the UK Insolvency Service, with funding through a taxpayer-guaranteed indemnity estimated to have cost tens of millions of pounds.

Jingyes accord with unions this week marked an important step in its rescue. The deal includes a retention bonus paid to workers in their first year under Chinese ownership and no changes to shift premiums or take home pay. Alasdair McDiarmid, operations director at Community, said it was a better deal for employees than what was otherwise on the table.

An unsuccessful bidder for British Steel, Sanjeev Guptas Liberty House, wanted to gradually shift Scunthorpe away from blast furnace production to electric arcs, but the likely job losses as a result were a factor in the offer being turned down.

Ben Houchen, the Tees Valley Tory mayor, recently promised to bring steelmaking back to Teesside when launching his campaign for re-election. Earlier this month the government committed £71m, bringing to £208m so far the public sector support to turn the Redcar site into a hub for new industrial users.