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UK steel, auto sectors welcome 'green plan,' see supply chain, local content challenges

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UK steel, auto sectors welcome 'green plan,' see supply chain, local content challenges

Highlights

Plan aims to aid steel sector decarbonization

Auto sector considers timing challenging

London — UK steelmakers and vehicle manufacturing industries have welcomed Prime Minister Boris Johnson's new "green plan" announced Nov. 18, but fear shortcomings in local supply chains in some areas, and stress the need for local content to be maximized amid "immense challenges".

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The Ten Point Plan for a Green Industrial Revolution sets what are viewed as ambitious new goals embracing clean energy and transport and innovative technologies, in which steel will play a vital role. The government will invest GBP12 billion ($15.93 billion) in the plan, centered on "the UK's industrial heartlands," including in the North East, Yorkshire and the Humber, West Midlands, Scotland and Wales, where much of the nation's steel, aluminum and carmaking capacity is located, "which will drive forward the green industrial revolution and build green jobs and industries of the future," a government statement said.

"New green infrastructure is precisely what the economy needs to rebound, and the UK steel industry is ready to support the Government's build back better strategy by supplying the world-class steel that is essential for our offshore wind, energy-efficient buildings, electric vehicles, and hydrogen networks," said steel sector association UK Steel director general Gareth Stace in a statement. However, "the Government must set clear objectives for steel procurement in these major projects, as happens in the United States."

One source involved in producing steel for wind farms expressed concern that while the government wishes to push windpower in the UK, there is currently no domestic monopole or wind tower assembly facility, meaning large structures for windfarms need to be shipped some distance to the UK, generating considerable emissions.

UK Steel highlighted that UK electricity prices are higher than in competitor locations in the EU.

"The Government's continued silence on industrial electricity prices remains a major concern," Stace said. "All options of decarbonisation will lead to higher electricity use for the steel sector and many other industries, making high power prices a substantial barrier to meeting the Net Zero target."

For some steelmakers, electricity represents the largest cost after raw materials, above even labor costs, according to UK Steel, which last year estimated the nation's steelmakers bear annual electricity costs GBP47 million higher than those of its German counterparts.

Tata Steel, Liberty applaud plan

A spokesperson for Tata Steel, the UK's biggest steelmaker, owner of the integrated Port Talbot mill in Wales, said the company "continues to work constructively with government on developing a strong and sustainable future for our UK steel operations. At the same time government has recognized the importance of steel to a decarbonized future which we stand ready to support."

Tata Steel has for several months been in dialog with the UK government on potential measures to safeguard the future of the Port Talbot mill, following the collapse of merger plans between Tata Steel Europe and German steelmaker Thyssenkrupp's Steel Europe unit last year on competition grounds. Tata Steel's announcement last week that it will split its UK and Netherlands steel operations is expected to speed decision-making on sustainable solutions for both operations.

Tata Steel, along with major UK-based steelmakers Liberty Steel Group and British Steel, are seeking to decarbonize their existing operations and may benefit from the Ten Point Plan's announcement of GBP200 million of new funding to create two carbon capture clusters by the mid-2020s, with another two to be created by 2030. This boosts the total invested in this initiative to GBP1 billion, helping to support 50,000 jobs, potentially in Humber, Teesside, Merseyside, Grangemouth and Port Talbot – areas near the country's biggest steelworks.

"We welcome government's focus on tackling CO2 through innovation and ensuring employees are given the tools they need to retrain for the thousands of green jobs of the future," the Tata Steel spokesperson said.

Sanjeev Gupta, executive chairman of GFG Alliance, Liberty Steel's parent company, said: "We welcome the Government's plan. GFG Alliance's mission is to deliver a low carbon economy by transforming foundation industries such as steel and aluminium. For the UK to meet its climate commitments it must seize the chance to reinvent its steel sector as a low carbon leader - encouraging innovation and problem-solving, and rewarding those who move fastest in the transition to green steel."

Automotive "challenges" seen

The UK's Society of Motor Manufacturers and Traders shares the government's road transport decarbonization initiatives and is "committed to the journey," said CEO Mike Hawes. Manufacturers have already invested billions to deliver vehicles to help drivers switch to zero, "but this new deadline, fast-tracked by a decade, sets an immense challenge," he said in a statement.

The UK now aims to end the sale of new petrol and diesel cars and vans by 2030, 10 years earlier than planned. According to Electric Vehicle Association EVA England, a consumer group, this presents "a number of challenges" in the areas of affordability and provision of vehicle charging infrastructure.

"We are pleased to see Government accept the importance of hybrid transition technologies – which drivers are already embracing as they deliver carbon savings now – and commit to additional spending on purchase incentives," Hawes said. "Investment in EV manufacturing capability is equally welcome as we want this transition to be 'made in the UK', but if we are to remain competitive – as an industry and a market – this is just the start of what's needed."

Plan's key targets

In offshore wind, the Ten Point Plan aims to produce enough offshore wind to power every home, reaching 40 GW by 2030; in hydrogen, to generate 5 GW of low carbon hydrogen production capacity by 2030; in electric vehicles, to back car manufacturing bases including in the West Midlands, North East and North Wales to accelerate the transition to EVs; and in carbon capture, to become a world-leader in technology to capture and store harmful emissions away from the atmosphere, with a target to remove 10 million mt of carbon dioxide by 2030.