0:00

This is the Guardian.

0:02

Today, why

0:04

the government

0:06

has decided to

0:09

save British steel?

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to learn more. We meet

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under exceptional circumstances

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to take exceptional action

1:00

in what are exceptional

1:02

times. MPs were supposed

1:05

to be on their

1:07

Easter holidays this Saturday. when

1:09

they were recalled to Parliament

1:12

for an emergency city. As we

1:14

seek to pass emergency legislation that

1:16

is unequivocally in our national interest.

1:18

Jonathan Reynolds, the business secretary,

1:20

introduced a bill to save

1:22

British Steel's plant in Scumthorpe,

1:24

the last remaining maker of

1:26

mass-produced virgin steel in England. Jasper

1:29

Jolly, a financial correspondent at the

1:31

Guardian, was listening into the historic

1:33

city. I think it shows

1:36

the severity of the situation

1:38

or how seriously the government

1:40

was taking it. Parliament's only

1:43

been recalled for a Saturday

1:45

sitting six times since the

1:47

end of the Second World War

1:49

and the last time was the

1:52

Falklands War. As MPs debated

1:54

in Westminster, 170 miles

1:56

north in Scumthorpe, tensions

1:58

were building. There was

2:01

a parade on the

2:03

pitch at Scunthup United's

2:05

home game that Saturday,

2:07

but at the plant

2:09

there was also drama.

2:11

From what we understand,

2:14

Jingyay officials, so officials

2:16

from the owners of

2:18

the plant, turned up at

2:20

the plant and as far as

2:22

we know they were denied

2:25

entry and police were

2:27

actually called. This

2:32

really is the most power that

2:34

the government has had over the

2:36

steel industry since 1988, which was

2:39

when Margaret Thatcher privatized it. It's

2:41

a really remarkable moment. From the

2:43

Guardian, I'm Helen paid. Today in

2:46

focus, the scramble to save Britain's

2:48

final blast furnaces. Jasper

2:55

Jolly, you're a financial reporter for The

2:57

Guardian, which means you've barely had a

2:59

weekend. It has been so busy. You

3:01

have been watching closely as all of

3:03

this drama unfolded on Saturday and MPs,

3:05

as you've said, were recalled from their

3:08

Easter breaks to come back to Parliament.

3:10

Can you just walk us through what

3:12

they actually voted for? The government now

3:14

has the power to direct British steel.

3:16

The government does not yet own British

3:18

steel, but it has a say over

3:20

everything that British steel does. Okay, I

3:22

get a bit confused about this, so

3:25

it is probably worth spelling it out.

3:27

British deal is the name of the

3:29

company, which runs the Scumfor plant, and

3:32

that company, despite its name, is actually

3:34

controlled by a Chinese firm called Jingye.

3:36

And so what can the government tell

3:39

Jingye to do? An early thing that

3:41

they've done is ordered. that the managers

3:43

to try to secure the raw materials

3:45

needed to keep the blast furnaces running.

3:48

So blast furnaces need materials like cooking

3:50

coal and iron ore. And so they've

3:52

said, go and get those materials,

3:55

make sure that these blast furnaces stay

3:57

running so that we can work out

3:59

the longer term. future of the plant.

4:01

And I mean I'm so far

4:03

from an expert on this but

4:05

that sounds like a very unusual

4:07

step to be taking. I mean

4:10

for government to be able to

4:12

intervene like this is quite extraordinary.

4:14

Yeah so the UK still industry

4:16

has gone through different guises since

4:18

the Second World War it was

4:20

nationalised and then privatised by Margaret

4:22

Thatcher in 1988 and since then

4:25

Scumfort Steelworks, which is now called

4:27

British Steel, has been owned by

4:29

various companies, so it's gone through

4:31

Indian ownership under Tata Steel, it

4:33

then was handed on to a

4:35

private equity fund called Grable Capital,

4:37

and then finally on to Jingai,

4:40

the Chinese owners, who bought it

4:42

in 2020. So the thing that

4:44

we think of as the UK

4:46

steel industry has gone through a

4:48

lot of turmoil and a lot

4:50

of different hands over the recent

4:52

decades. And the fact that the

4:55

government now can intervene so directly

4:57

in the affairs of British steel,

4:59

is that basically renationalising it? It's

5:01

not real nationalised yet, but it

5:03

really does feel like we're close

5:05

to nationalisation. However... Jingyay still for

5:08

the moment retains the economic ownership,

5:10

which means that in theory, where

5:12

British steel to make profits, then

5:14

it would be entitled to those

5:16

profits. And also in theory, Jingyay

5:19

could continue to manage it, just

5:21

as long as the government agrees.

5:23

In practice, I find it difficult

5:25

to see how Jingyay, after having

5:27

their control removed, will be able

5:30

to step back into the breach,

5:32

and I suppose even covering this

5:34

story for the last few years...

5:36

I'm not sure I ever thought

5:38

it would get to this point,

5:41

so one step further to nationalisation

5:43

suddenly doesn't seem that far away.

5:45

Tell me about the plants at

5:47

the heart of this story in

5:49

Skunthorpe. Why is it so important?

5:52

So steel is one of the

5:54

fundamental industries in any... economy, when

5:56

you take a train, you're on

5:58

steel rails, when you eat your

6:00

breakfast, you're using a spoon made

6:03

of steel. So obviously it's a

6:05

fundamental thing. But the thing that's

6:07

prized at, I suppose, a strategic

6:09

level is in the case of

6:11

a war, if the UK had

6:14

to suddenly start churning out a

6:16

lot of warships, would we have

6:18

the ability to make steel from

6:20

iron ore? That's called primary steel

6:22

making ability. And the blast furnaces

6:25

at Scunthorpe, there are two remaining

6:27

blast furnaces. They are the only

6:29

blast furnaces left in the UK

6:31

now. So if they were to

6:33

close, and the threat was that

6:36

they were going to close within

6:38

days, then that would leave the

6:40

UK without that primary steel-making ability.

6:42

And the UK would be the

6:44

only country in the G7 that

6:47

has made that decision. And clearly...

6:49

the government has said that is

6:51

a decision they're not willing to

6:53

take. They want to preserve that.

6:55

And just tell me about how

6:58

important the plant is for the

7:00

local community, how many people work

7:02

there, and presumably the wider supply

7:04

chain means that there are many

7:06

more multiples of people whose livelihoods

7:09

all rely on the plant. Yeah,

7:11

so there are about 3,500 people

7:13

employed directly. it's slightly unclear how

7:15

many jobs would be threatened if

7:17

the blast fences were to close

7:20

because there are parts that are

7:22

involved in processing the steel but

7:24

3,500 is roughly the direct number

7:26

but then as you say the

7:28

broader context is this is a

7:31

plant which is the main employer

7:33

for a town a town that

7:35

is relatively remote geographically and they

7:37

just aren't other employers who would

7:39

be able to pick up that

7:42

slack. You know, I go to

7:44

a lot of industrial towns all

7:46

around the UK and, you know,

7:48

when you go to Scunthorpe, it

7:50

is really striking. There are four

7:53

furnaces too defunct that loom over

7:55

the town and they're known as

7:57

the four queens named after... Queen

7:59

Anne, Queen Bess, I think that's

8:01

Queen Elizabeth, Queen Victoria and Queen

8:04

Mary, Anne and Bess are still

8:06

in operation. It is really striking

8:08

how deeply ingrained the steel industry

8:10

is in that town. And it

8:12

sounds like this crisis at British

8:14

Steel hasn't come out of nowhere.

8:17

Can you just walk us through

8:19

how it's got in so much

8:21

trouble? Yeah, so the tale of

8:23

UK steel has been one of

8:25

decline over several decades. It appears

8:28

that Gene thought that they could

8:30

make a profit where the companies

8:32

had failed, but the conditions in

8:34

the global steel industry for several

8:36

years have been really, really challenging.

8:39

So if you look at the

8:41

global steel industry, the UK is

8:43

a minnow. I think the 26th

8:45

largest steel producing, so it really

8:47

is not a big deal. 5.6

8:50

million tons compared with China, the

8:52

number one, 1 billion tons, which

8:54

is more than half of the...

8:56

global steel output. So the Chinese

8:58

industry is the one that sets

9:01

the pace for the global industry.

9:03

In China they have been going

9:05

through a property crisis for several

9:07

years which has massively cut demand

9:09

for steel within China. That means

9:12

that you get all of those

9:14

Chinese producers of steel and they

9:16

are looking all around the world

9:18

trying to find someone to buy

9:20

their steel. That means that there's

9:23

a global glut of steel and

9:25

prices have collapsed, and that's put

9:27

even the strongest steelmakers under quite

9:29

a lot of pressure. And British

9:31

steel has made 350 million pounds

9:34

of combined losses since Jingy took

9:36

over in 2020. 350 million pounds,

9:38

goodness. And is that because there

9:40

just wasn't demand for the steel,

9:42

the virgin steel, that they were

9:45

churning out because of all these

9:47

cheap Chinese exports? There is still

9:49

demand. I mean, one of the

9:51

key customers for British steel is

9:53

rails. the skunthought plant makes long

9:56

products. So they make construction beams

9:58

that go in buildings or bridges,

10:00

but they also make rails on

10:02

which the railway depends. That's a

10:04

pretty constant demand for materials. But

10:07

the problem is those materials, if

10:09

you're facing competition from other parts

10:11

of the world, then the prices

10:13

can fall. And so they've struggled.

10:15

Right, okay, so that's one reason

10:18

why the plant was in trouble.

10:20

I mean, I'm wondering given the

10:22

current global economic climate right now,

10:24

all of the confusion over Trump's

10:26

tariffs, has that fed in to

10:29

the decision at the weekend of

10:31

the government to step in? Or

10:33

is that just too late to

10:35

the party to have made a

10:37

difference here? The crisis has definitely

10:40

been brewing since before Donald Trump

10:42

came to power. That said, there's

10:44

no good news for steel producers

10:46

outside of the US from his

10:48

tariffs. executives from Tata Steel and

10:51

British Steel have said they have

10:53

lost customers already in the US.

10:55

So you're talking about Tata Steel

10:57

which is the company that runs

10:59

Britain's other steelworks in Wales? Perhaps

11:02

a bigger concern is the possibility

11:04

of trade diversion. So if you

11:06

think of that giant Chinese market

11:08

a billion tons in 2023, a

11:10

large proportion of that was going

11:13

to the US. Now suddenly those

11:15

Chinese companies are going to say

11:17

we can't sell it to the

11:19

US because these tariffs are prohibited.

11:21

Yeah, 145% or something. Exactly, yeah,

11:24

so we're going to look for

11:26

other buyers. Okay, so there's a

11:28

global glut of steel combined with

11:30

these economic headwinds that are making

11:32

the skunthought plants seem increasing the

11:35

untenable for jinnier and British steel,

11:37

but the other explanation I've heard...

11:39

raised about why things have got

11:41

to this point in skunthorpe is

11:43

the government's net zero agenda. Has

11:46

that played into the difficulties at

11:48

the plant, this need to decarbonise

11:50

such a carbon-intensive industry? It's important

11:52

to realise that it is simply...

11:54

unavoidable to produce carbon dioxide when

11:56

using a blast furnace. Now all

11:59

steelmakers eventually are going to have

12:01

to switch to cleaner technology and

12:03

the choice of most steelmakers so

12:05

far has been the electric arc

12:07

furnace which uses electricity to melt

12:10

recycle steel. British steel had said

12:12

that they were going to switch

12:14

to electric arc furnace so the

12:16

UK government offered 500 million pounds

12:18

of financial aid. but Jingyay insisted

12:21

on more and that has led

12:23

to a bit of an impasse.

12:25

So the electric arc furnace and

12:27

the transition away from polluting coal

12:29

is a huge part of skunk

12:32

thoughts future if it is to

12:34

have a future but it has

12:36

not been the direct cause of

12:38

the problems that are facing British

12:40

steel right now. Right, okay, so

12:43

the government offered Genea half a

12:45

billion pounds to help them transition,

12:47

but Genea said that that wasn't

12:49

enough. These negotiations have been going

12:51

on for ages for months now.

12:54

Can you just make clear why

12:56

you don't think that it was

12:58

the very fact of the green

13:00

transition that was such a sticking

13:02

point making it so difficult to

13:05

sort out? We think that there

13:07

was the possibility of a higher

13:09

offer, but our understanding... based on

13:11

sources with knowledge of the talks,

13:13

is that Jingye had asked for

13:16

as much as a billion pounds.

13:18

Now you can trust that with

13:20

Tata Steel, which has also made

13:22

the same move of upgrading their

13:24

furnaces from blast furnaces to electric

13:27

arc furnaces, and it received 500

13:29

million, alongside an investment of 750

13:31

million. In the case of Jingye...

13:33

as far as we know the

13:35

pledge of support from jingy itself

13:38

was not forthcoming in the same

13:40

way and they were also asking

13:42

for more money from the government

13:44

and eventually it seems that the

13:46

government's patience wore down and apart

13:49

from these it sounds like quite

13:51

frustrating negotiations between jingy and the

13:53

government what else do you think

13:55

the government way hearing that made

13:57

them worry about what Ginye's intentions

14:00

really were for the scumthought plant.

14:02

So hanging over the talks was

14:04

the fact that there simply was

14:06

not enough raw material to keep

14:08

the scumthought plants going for the

14:11

next few weeks. The coke and

14:13

coal and the iron ore pellets

14:15

that are absolutely vital, you know,

14:17

that's what the blast furnace does,

14:19

had not been ordered by Ginye.

14:22

So there was this bizarre situation

14:24

where... some of the materials were

14:26

at a port nearby in Imingham

14:28

in Lincolnshire and had not been

14:30

paid for by Jingay. We presume

14:33

because they thought we're not going

14:35

to be investing in this plant

14:37

anymore so why shell out more

14:39

for raw materials from the government's

14:41

point of view when it wanted

14:44

to preserve the plant and make

14:46

sure that it didn't fall into

14:48

disrepair. It was absolutely vital to

14:50

get those materials. and as we

14:52

record this they are still racing

14:55

to get those materials and secure

14:57

them not just for the next

14:59

few days but also for the

15:01

next few weeks as they then

15:03

think about the longer term future.

15:06

So it really was a crisis

15:08

within a crisis. They have this

15:10

short-term demand for the raw materials

15:12

before they start to address some

15:14

of the really big long-term problems.

15:17

And can you just explain why

15:19

you can't just turn a blast

15:21

furnace on and why there is

15:23

this race against time to ensure

15:25

that? the furnaces can be stoked

15:27

with this coal that an iron

15:30

ore that's sitting on the boat.

15:32

Yeah, so a blast furnace runs

15:34

continuously. They ran all through the

15:36

pandemic, every Christmas, there's someone on

15:38

shift. They just do not stop.

15:41

And the reason is the temperatures

15:43

are so high within the blast

15:45

furnace, you know, well over a

15:47

thousand degrees Celsius. You just cannot

15:49

let those temperatures drop because, one,

15:52

it would take a lot of

15:54

energy to get back up to

15:56

those temperatures. in the first place.

15:58

But second of all, if the

16:00

temperature drops too far, then the

16:03

molten iron will... freeze will turn

16:05

from liquid to solid. And, you

16:07

know, if you imagine the blast

16:09

furnace has this big tower with

16:11

a tap at the bottom where

16:14

they let out the molten iron,

16:16

that plug, it would essentially be

16:18

clogged. And there's simply no way

16:20

back. But in this case, it's

16:22

just come right down to the

16:25

wire, which has added a bit

16:27

more drama. Is it wise to

16:29

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16:31

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17:13

Just what is motivating the

17:15

government here? Would you say

17:17

that it's as much of

17:20

a political move as it

17:22

is motivated by genuine national

17:24

security concerns? I think it

17:26

at its heart it is

17:28

a political decision. I think

17:31

there are two facets of

17:33

that. First of all, there's

17:35

the fact that Scumthorpe is

17:37

utterly reliant on this plant

17:39

and the idea of, or

17:42

the picture of a labor

17:44

government allowing 2,700 workers to

17:46

lose their jobs would be

17:48

undoubtedly damaging. That said, I

17:51

do think the key political

17:53

decision is more of a

17:55

strategic one. You're asking the

17:57

question, does the UK want

17:59

to, a need to produce

18:02

steel on its own? Every

18:04

other member of the G7

18:06

makes steel. So if the

18:08

UK were to go it

18:10

alone, people would ask the question,

18:13

well, why have we made this

18:15

decision? Why is the UK different?

18:17

Why can we do without steel?

18:19

And I suppose it kind of

18:21

does come down to that quite

18:23

fundamental judgment of, do you think

18:26

in wartime, would the UK need

18:28

to make steel? and the Labour

18:30

government has said quite firmly now, yes.

18:32

And why do you think they've

18:34

decided to step in for

18:36

Scunthorpe when other plants, and

18:39

I'm thinking particularly Portolbert in

18:41

Wales, weren't nationalised when a

18:43

very similar thing seemed to

18:45

be happening, i.e. the blast

18:48

furnaces were going to be closed.

18:50

I suppose the difference there is that

18:52

Tata has pledged the money, you

18:54

know, it has said we are

18:56

going to make this investment. And

18:59

so there was 500 million pounds

19:01

of government money, but there was

19:03

also 750 million pounds of money

19:05

from Tata to switch to electric

19:07

arc furnace. I should also add

19:10

that Tata is well trusted by

19:12

the government. It owns Jaguar Land

19:15

Rover, the largest car manufacturer in

19:17

the UK. Used to own Tetley

19:19

T. It has a long history

19:22

with the UK. And so you've

19:24

said that the move... this weekend

19:26

makes nationalisation ever more likely and

19:28

I think Jonathan Reynolds the business

19:31

secretary has said that renationalisation is

19:33

the next likely step if that

19:35

is what happens like can the government

19:37

afford to nationalise a plan and keep

19:39

it running we keep on being told

19:41

by the government you know what a

19:43

tricky situation the nation's finances are already

19:45

in and it's an expensive game isn't

19:47

it still Well, particularly if

19:50

the plant is lost making, it can

19:52

be increasingly expensive with every day that

19:54

passes. It has been striking in the

19:56

last few weeks and months that while we've

19:58

been having, you know... the international aid

20:01

budget cut, the welfare

20:03

budget cut, the government

20:05

has stuck firm with a pledge

20:07

to give 2.5 billion pounds to

20:09

the steel industry. It has not

20:12

detailed what that spending will go

20:14

on yet. So the government seems

20:17

committed. Nationalisation would

20:19

be a big move still,

20:21

and the steel industry faces

20:23

this decarbonisation challenge in the

20:26

future. Even when Scunthorpe gets through

20:28

this immediate crisis, if the government

20:30

were to nationalise, that would be

20:33

on the understanding that at some

20:35

point still the blast furnaces will

20:37

close. The government will then

20:39

have the decision if it is the owner.

20:41

Do we reach into our pocket and

20:43

invest in a new electric arc

20:46

furnace? If under a nationalised British

20:48

steel, then the government would have

20:50

to bear that cost itself.

20:52

But it's even if they did that. if

20:54

they follow the same path as being gone

20:56

down in import toll. But I thought the

20:58

whole thing about Skun thought was it

21:01

special because it can make steel from

21:03

scratch. Yeah, so this is a

21:05

really interesting question about the

21:07

future of the British steel

21:09

industry because electric arc furnaces

21:11

cannot produce steel from scratch

21:13

on their own. That would

21:15

need... an investment in a

21:17

new technology called direct reduced

21:19

iron. So rather than using

21:21

coal to strip the oxygen

21:23

from the iron ore, you

21:25

use hydrogen, green hydrogen,

21:28

so produced with electricity.

21:31

That process theoretically

21:33

would allow the UK to

21:35

continue to produce green steel.

21:37

However, investing in a

21:39

DRI plant, a direct reduced iron

21:41

plant, would add extra cost. And

21:43

that is not something that exists

21:45

in the UK currently. Well, that is

21:47

interesting. So it sounds like there is

21:49

potential for a more green way of

21:51

making steel from scratch, but we're not

21:53

there yet, clearly. And finally, Jasper, when

21:55

you reflect on what's happened with British

21:57

steel in Schenthorpe, does it raise questions?

21:59

for you about the wisdom of

22:02

allowing foreign companies, particularly Chinese

22:04

companies, to be involved in

22:06

owning critical British infrastructure. Jonathan

22:08

Reynolds said on the weekend

22:10

that there was a high

22:12

trust bar for bringing Chinese

22:14

investments into the UK and

22:16

he said that he would

22:18

not have allowed a Chinese

22:20

company to invest in the

22:22

sensitive steel sector. I think

22:24

the crucial word there is

22:26

critical infrastructure. Rachel Reeves was

22:29

out in China trying to attract

22:31

an investment a few weeks ago

22:33

into the UK The problem seems

22:35

to come when it is something

22:37

that the government considers as a

22:40

strategic Asset in this

22:42

case. They've said that steel making

22:44

is a strategic asset and there

22:46

have been other instances notably the

22:49

nuclear power station at Seizewelles That

22:51

was a joint French Chinese projects

22:53

and then the Chinese were bought

22:56

out of that a few years

22:58

ago. So there is, it seems,

23:00

increasing skepticism about the involvement of

23:03

Chinese companies in major infrastructure projects

23:05

in the UK, certainly. But at

23:08

the same time, the UK is

23:10

saying, please do invest in us.

23:12

So it's something of a two-faced

23:14

strategy and it's unclear how it's

23:16

going to play out. Yeah, well we

23:18

shall see in the coming days. Jasper, thank

23:21

you very much. Thank you. That

23:25

was Jasper Jolly. You can read all of

23:27

his analysis and reporting on the British

23:29

steel crisis at the guardian.com. And if

23:31

you're interested in what happens to a

23:33

town when the blast furnaces are shut,

23:35

then check out our episode on what

23:37

happened in Port Talbot and Wales last

23:39

year. It's called Can a steel town

23:42

survive if its furnaces are turned off?

23:44

And that's all for today. This episode

23:46

was produced by George McDonagh and Natalie

23:48

Genna. It was presented by Me Hellen-Pid.

23:50

Sound design was by Rudyrudy Zigadlo and

23:52

the executive producer was Courtney Yusif. Courtney

23:54

Yuss. We'll be back tomorrow. This

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