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British Steel has confirmed it plans to close down its blast furnaces in Scunthorpe, putting up to 2,000 jobs at risk.
They will be replaced with two electric arc furnaces – one at Scunthorpe and one at Teesside.
The company said its £1.25bn proposal would make British Steel “a clean, green and sustainable business”.
But it said the plans were still “subject to appropriate support” from the UK government.
The business, which is owned by China’s Jingye Group, said the new furnaces could be in operation by late 2025.
Chief executive Xijun Cao said the firm was not able to keep the blast furnaces and meet environmental commitments.
“We have engaged extensively with the public and private sector to understand the feasibility of producing net zero steel with our current blast furnace operations. However, thorough analysis shows this is not viable,” he said.
Unions estimate the shift could ultimately lead to the loss of 1,500 to 2,000 jobs, predominantly at Scunthorpe.
British Steel said it was working with North Lincolnshire Council on “a masterplan” to attract new business and jobs to the site in Scunthorpe, parts of which would become vacant under the proposals.
The Department for Business and Trade said the proposals were part of a plan to put the UK steel industry on a greener, more sustainable footing for the future.
A spokesperson said the government had offered “a generous support package including more than £300m of investment”.
Earlier this year, British Steel’s larger rival, Tata, announced it would close its two blast furnaces in Port Talbot and replace them with electric arc furnaces, with an expected loss of up to 3,000 jobs. It will receive £500m of government support.
British Steel said it remained in talks with the government over what backing it could expect for its strategy.
“We need the UK to adopt the correct policies and frameworks now to back our decarbonisation drive,” said Xijun Cao.
Governments in other countries had adopted such policies and waiting for the same in the UK could impact the firm’s competitiveness and the UK’s ability to meet its carbon targets, he said.
Government sources claim that the blast furnace plants are not economic – they are losing £1m a day, they say – and are not “green”, therefore making them unsustainable on financial and environmental grounds.
The government conceded that the plan to close the blast furnaces at Scunthorpe and Port Talbot will leave the UK without the ability to make “virgin steel”.
But it insisted that there were limited domestic cases where that kind of steel was needed, and that the output from electric arc furnaces covered most of the UK’s needs.
Coke-fuelled blast furnaces reach a higher temperature and can smelt iron ore directly to create steel. But they emit more greenhouse gases and require greater manpower.
Electric arc furnaces are mostly used to melt down and repurpose scrap steel. The end product is not the same grade of steel that is produced in blast furnaces, and is not suitable for all industrial uses in, for example, motor manufacturing and construction.
However, because they run at lower temperatures, arc furnaces can be powered by renewable energy sources. They can produce stainless and alloyed steels.
Unions expressed concern at the timescale of the migration and said they would examine British Steel’s proposals in detail.
Roy Rickhuss, general secretary of the Community, the specialist trade union representing UK steelworkers, said he was “deeply concerned” by the plans to switch to only electric arc furnaces, which he described as “dangerous and foolhardy”.
“The plans that British Steel has announced, combined with Tata Steel’s plans, would leave the UK unable to make steel from raw materials and dangerously exposed to international markets,” he said.
Paul Nowak, general secretary of the Trades Union Congress, warned: “Workers won’t stand back and watch as Britain’s steel industry is dismantled in real time.”
Unions have already threatened industrial action over Tata’s plans.
“The Conservatives are presenting a false choice,” he said. “Other countries have shown that it is possible to transition to zero-carbon steelmaking and protect good steelmaking jobs for the future. We can do the same here.”
Charlotte Brumpton-Childs from the GMB union said the closure would be “a hammer blow” for UK steel and “devastating” for the people of Scunthorpe.
The towers and chimneys of the steelworks have been part of the Lincolnshire town’s landscape for more than five decades, employing generations of local workers.
But the UK’s second largest steel manufacturer collapsed in 2019, then was bought by Jingye, with promises to invest more than a £1bn over 10 years.
A British Steel spokesperson said the company was committed to “providing long-term, skilled and well-paid careers for thousands of employees and many more in our supply chains”.
The firm announced in February that it was closing its coking oven, used to turn coal into fuel for the blast furnaces. At the time it said steelmaking in the UK was “uncompetitive” with some of the highest energy, carbon and labour costs in the world.
