British Steel 'rescue talks' leads to fears over North East jobs

It has been reported that Jingye is struggling against soaring global energy prices and is not prepared to bankroll the company much longer.

Read more:  Green light for British Steel's £26m Skinningrove plans

What led to this crisis?

Many businesses are facing soaring energy bills, and the Goverment has already recognised that by offering support - just as it has for households. But this is seen as too short-term and some sort of long-term vision is needed, requiring huge amounts of money and the confidence to say that we still want to be a steel-producing country.

Industry is changing and the challenge - and cost - of decarbonsiation weighs heavily on energy-hungry businesses reliant on blazing blast furnaces.

The feeling of dislocation is also a factor. The takeover by Jingye was a billion-pound lifeline, but their attachmement and heritage is not the same, so their approach might be more detached: Help us or we'll leave.

What happened in 2020?

When  Jingye formally completed the £70m acquisition of British Steel’s UK and Netherlands assets from the Official Receiver, the deal included the Teesside Beam Mill and Skinningrove plant.

Jingye pledged to invest £1.2 billion into the company, with initiatives including the development of an Electric Arc Furnace in Teesside set to guarantee around 800 jobs in the Tees Valley.

But prices for many large comopanies, particularly steel producers, are considered to be rocketing out of control and they are looking for a safety net.

Who is Jingye?

Jingye Group was founded in 1990, and its headquarters are located in Shijiazhuang, China.

As a leading steelmaker, Jingye's affiliates also include Jingye Steel, Ulanhot Steel, Yunnan Jingye Steel and Guangdong Jingye Steel.

It employees 31,000 people and in 2020, the group recorded a turnover of 224.4 billion Chinese Yuan, contributed tax of 3.9 billion Chinese Yuan and was ranked 166th on China's 2020 list of top 500 enterprises.

What sites are at risk?

The Scunthorpe Steelworks is the UK headquarters and the main blast furnace production site.

The Lackenby Beam Mill on Teesside employs  around 400, manufacturing large steel sections for the construction industry, including The Shard in London and the new World Trade Centre in New York.

The Skinningrove Steelworks makes special profiles, including sections and crane rail. Work is already underway on a £26million upgrade here, to include product milling, machining and warehousing operations.

What is being done to help?

In a week of political earthquakes, giving hundreds of millions to keep two furnaces alive will test the limits of the new Business Secretary Jacob Rees-Mogg and under-fire Chancellor Kwasi Kwarteng.

Tees Valley Mayor Ben Houchen said: “Just two and a half years after Jingye took on British Steel, securing hundreds of jobs in communities across our region, there’s now even more uncertainty for its future.   

“I massively sympathise with all of its hard-working staff, and their families, who must be thinking ‘What now?’ and are facing the unknown, all at a time when the cost of living is rising.

“I am speaking to bosses in Teesside to see what I can do in the short-term while I call on Government to do all it can to protect people’s livelihoods both here and in Scunthorpe.”

What does British Steel say?

A British Steel spokesman said: “We are investing hundreds of millions of pounds in our long-term future but like most other companies we are facing a significant challenge because of the economic slowdown, surging inflation and exceptionally high energy and carbon prices.

"We welcome the recent announcement by the UK Government to reduce energy costs for businesses and remain in dialogue with officials to ensure we compete on a level playing field with our global competitors.”

British Steel has been investing in Teesside (Image: Press release)

Is steel ever going to be viable again?

There seemed to be an air of investment on Teesside, with the huge Skinningrove plans, £1m measuring lasers being installed and much talk of how hydrogen could help make greener steel, but Chris McDonald, Chief Executive of the Materials Processing Institute in Middlesbrough, told us: “The competitive environment for steel in Europe is difficult, with mills idled due to a fall in demand and higher energy costs from the War in Ukraine.

“The situation in the UK though is always much more difficult due to higher costs than our European competitors and now the relatively weaker pound, which makes raw materials more expensive. Add to this the need to invest soon in new zero carbon technology and the outlook for UK steel production is very tough.

Is Government doing enough?

Chris McDonald says: “The response from other European governments has been to keep energy costs for steel companies as low as possible and support the green transition by investment in research and development, as well as funding for capital investment. At the Materials Processing Institute on Teesside, we are leading work in the UK for the transition to zero carbon steelmaking, with support from government, and are asking for the resources to build a new hydrogen steelmaking pilot facility.

“Government will need to do all of this, and more, if we are to remain competitive in steelmaking. The UK’s steel industry is already small, only about the same size as that of Belgium. Without further support we risk the UK becoming the only modern industrial economy unable to meet its needs for steel – something that seems particularly risky to me in these uncertain times.”

What happens next?

As the world looks on in horror at what has happened to the economy in Liz Truss's few weeks in office, throwing a steel crisis into the mix is the last thing the PM needs.

But this is also a chance to divert attention and be seen to be a positive force rather than a Government under siege.

Unexpectedly, Business Secretary Jacob Rees-Mogg could be set up here as the stabilising factor, striding through the political nightmare and saving jobs.

There will be more meetings with Jingye at which each side will want to make sure it has squeezed every last ounce out of the other. But these are steel jobs that speak of our heritage and the fact that we need to be a nation that makes things.

Hundreds of families here on Teesside will be hoping the Goverment and Jingye together make a solution and not a pig's ear.

Read next:

• Steel at Teesside Freeport is first delivery in UK
• 1.6 tonnes of explosives used to demolish BOS Plant
• Work on hydrogen steel pilot production facility in Teesside