There is a respectable peacetime economic case for closing the Port Talbot blast furnaces and ceasing production of basic oxygen steel (BOS) in the United Kingdom and it is set out by the leading trade economist Catherine McBride. She shows how much British steel-making of any type has declined by volume, and how chronically dependent what remains is upon imported raw materials. She also explains how much EAF – electric arc furnace – steel production from recycled scrap has increased worldwide: for example, 70% of American steel in 2022 came from that source. Finally, she shows how globally dominant China and India have become in BOS, as witness 90% of China’s one billion ton steel production in 2022. China and India have massive economies of scale, and also access to domestically controlled raw materials, giving end-to-end control: in the Chinese case, both coking coal and iron ore, and in the Indian case, iron ore but with need to import coking coal. In contrast, the U.K. currently has to import both ore and coking coal at scale to feed the condemned blast furnaces.
While neither of the Asian giants exports much primary steel – in the Chinese case, only 40 million of 1 billion tons produced – both are major suppliers of steel products. The U.K. buys more steel products from China than from anywhere else, and therein begin the problems. “While the U.K. doesn’t matter to China, China matters to us,” McBride observes sharply.
There is an unrespectable case for closing the Port Talbot blast furnaces and replacing them with EAFs. It is the one which the Government supports and, with a half billion pound bung, proposes to pay Tata Steel to effect: you can be sure that it wouldn’t do it otherwise. This is the claim of some contribution on the fantasy road to ‘Net Zero’ where the harder you try the more you fail.
However, in two major reports, the iron and steel trades unions have blown that alleged ‘Net Zero’ gain out of the water, pointing to the obvious: BOS steel not produced in Port Talbot will be produced elsewhere and imported to this country. So there is zero reduction to global carbon dioxide emissions and there is the addition of emissions from ocean transport. Without pig iron, there is also loss of full-spectrum virgin steels capability, loss of high quality jobs and the social devastation of lives in South Wales. The unions’ plan is on the right side of history and should simply go further: ignore the ‘Net Zero’ targets and focus, on national security grounds, on securing a domestic balance of BOS and EAF production. France and Germany both have a 70/30 split, for example. The unions plainly understand the industry better than any civil servant or think tank genuflecting to Net Zero targets.
Therefore, this is the moment when the music stops. The Port Talbot closure harshly exposes the costs of luxury ‘green’ beliefs as we enter the second phase of a global war. It is a war of different theatres and modes of conflict: simultaneously ‘hot’ (kinetic) in Ukraine, the Middle East and with Taiwan threatened; ‘cold’ (economic) with China, Russia and Iran; and ‘grey’ (psychological, cyber and subversive) with all the enemies of the Free World. Major recent statements by NATO’s Military Committee Chairman, the Head of the Army (and Norwegian and Swedish CDSs) and the Defence Secretary finally inform the public of these inconvenient facts. This is no drill.
These concerns touch upon the question of Port Talbot directly and add to the many powerful objections to the closure decision. It must be reversed – we cannot be dependent on imports for the full range of necessary steels to rebuild our arsenals – the Navy first and foremost – and most ridiculously, we cannot be dependent for them on our global antagonists. China’s coal-fired economy is why it can readily build its new navy, just as we once did and must again.
Catherine McBride’s primary argument for replacing BOS steelmaking with EAF is concern about reliance on imported strategic raw materials. However she also observes that U.K. electricity costs are among the most expensive in the world and this destroys the case for EAFs as well, or for any unsubsidised steel production in the U.K. at all. EAFs require abundant and stable electricity supplies, such as they have in the USA. And the cause of the U.K.’s crippling electricity price? Net Zero. So the issue is not BOS versus EAF steel: it’s Net Zero’s all pervasive toxicity, poisoning U.K. power generation.