INTERVIEW: Industry body UK Steel sees 'opportunity' for future output in country

The UK steel industry has historically been a vital part of the nation's industrial heritage, contributing significantly to the country's economy and employment. But the sector has faced a dramatic decline, raising concerns about its future viability and broader economic implications.

The UK has gone from being the fifth-largest steel producer globally in the late 1960s to 26th place as of last year, with just 4 million mt of crude steel produced in the country. Recent data from World Steel ranks the UK ninth for steel production in the EU in 2023, behind leaders Germany and Italy. If key producer British Steel ceases output, however, the country's standing globally will likely fall even further.

Speaking in a recent interview with Platts, Gareth Stace, director general of UK Steel, attributed this decline to a lack of investment and a failure to adapt to changing global markets.

"China was seen as a great market for exports, but it quickly transitioned from being an importer to self-sufficiency and then an exporter," he added.

This shift has left UK producers struggling, with domestic production now meeting only 35% of demand.

Overproduction of steel by China has also pushed down prices, exerting further pressure on mills in Europe, which face higher costs for raw materials, energy, and labor.

Stace said that the UK government has not adequately addressed these challenges.

"We've been telling the government for years that we're uncompetitive due to energy prices, but they didn't listen," he said, adding that imports now account for 65% of UK steel demand.

The UK steel sector aims to electrify operations through investment in electric arc furnaces, making electricity prices even more critical. Currently, UK steel plants are operating well below their installed capacity, contributing to the overall decline in the manufacturing sector, which has dropped to 12th in global rankings, its lowest since 2012. This decline has been exacerbated by the impacts of Brexit and the COVID-19 pandemic, Stace said.

Despite these challenges, Stace said he remains optimistic about the future of the steel industry.

"There is a future demand for steel in the UK, and while it may not rise significantly, there is a substantial opportunity to increase domestic production," he said.

A study by UK Steel suggests that the UK will need 20-25 million mt of steel over the next 25 years for offshore wind projects alone, valued at GBP21 billion.

Looking ahead, Stace stressed the importance of aligning production capabilities with domestic steel demand.

"We need a blueprint for a sustainable, profitable steel sector in the UK," he said, advocating for a focus on products needed for transportation and renewable energy projects.

As the UK government approaches the potential nationalization of British Steel, Stace highlighted the implications for future investments and supply chains.

"If the government decides to nationalize, it must be a sustainable choice that attracts long-term investors," he said.

The government's upcoming steel strategy, expected in June, is seen as a crucial opportunity for it to outline actionable measures rather than vague intentions.

"We are at a crossroads; it's vital that the strategy reflects the urgency of the situation," Stace said, referencing the significant parliamentary recall to address British Steel, a rare occurrence since 1982.