Britain's biggest steelworks, at Port Talbot, in south Wales, is to be given £500 million ($621 million) by the UK government to switch to producing steel in a more environmentally friendly way.
The plan is to replace the blast furnaces – which are powered by coke – with electric arc furnaces, at the steelworks that employs about 4,000 people.
Indian conglomerate Tata Steel, which owns the Port Talbot steelworks, will invest £700 million of its own funding to enable the switch.
Electric arc furnaces have been shown to emit 85 per cent less carbon dioxide than blast furnaces.
However, union leaders fear the move to greener production could mean thousands of jobs being shed.
The new electric furnaces cost around £1.25 billion and will take three years to come online once regulatory and planning approvals have been granted.
Tata Steel has been in discussion for months over the funding package and, at one point, said its entire UK operations would be in jeopardy without it.
Initially, the government offered £300 million, but the Indian owner lobbied for more.
“The UK government is backing our steel sector, and this proposal will secure a sustainable future for Welsh steel and is expected to save thousands of jobs in the long term,” said Business and Trade Secretary Kemi Badenoch.
“This is a historic package of support from the UK government and will not only protect skilled jobs in Wales but also grow the UK economy, boost growth and help ensure a successful UK steel industry.”
Switching to electric arc furnaces at Port Talbot will mean that the British Steel plant at Scunthorpe in Lincolnshire, eastern England, will be the only steelworks left in Britain with blast furnaces.”
It's owner, the Chinese company Jingye, is also seeking a financial package from the government.
However, Tata Steel is also expected to undergo a period of restructuring as a result of the plan to make steel production greener.
The UK government said the support package, which is one of the largest of its kind in history, “has the potential to safeguard over 5,000 jobs across the UK”.
That has set alarm bells ringing at the unions, not least because Tata employs 8,000 workers in the UK.
The move to using electric arc furnaces would be accompanied by a switch to producing recycled steel, rather than new or 'virgin' steel, a process that requires fewer workers.
Aside from the warnings that thousands of jobs might be under threat, unions also complained at being shut out of the discussions.
“Government intervention in the steel industry is long overdue, but imposing a programme without proper worker consultation is unacceptable,” said Charlotte Brumpton-Childs, national officer at the GMB union.
“It is not a just transition if thousands of jobs are sacrificed in the name of short-term environmental gains.
“We wholeheartedly support the move to modernise and decarbonise the industry, in fact we have sought this type of investment for years.
“But ignoring technologies outside of electric arc furnaces will mean tens of thousands of people will lose their livelihoods,” added Ms Brumpton-Childs.
Hydrogen alternative
Some experts said the better long-term solution was to opt to include hydrogen-based technology in the green steel production plans.
“The government may be trying to do the right thing here, but if this deal leads to 3,000 job losses it can't be right,” said Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit, a non-profit organisation that conducts independent research on energy and climate issues.
“Having a long-term vision that leads to hydrogen-based steel manufacture at Port Talbot, as well as the arc furnaces that recycle used steel, could protect many more jobs.”
Some experts have said producing virgin steel using green hydrogen – hydrogen made using renewables – as an energy source would be more expensive in the initial phases than recycling steel.
No country makes virgin steel using green hydrogen, although a plant in Germany uses blue hydrogen, which is created from fossil fuels.
The UK's steel industry is responsible for 14.2 per cent of the country's total manufacturing emissions.
Carbon capture and storage has been put forward as another solution to the steel industry's greenhouse gas emissions. The method involves catching the carbon dioxide before it enters the atmosphere and storing it underground.
