Government offers to buy coal to save British Steel, sources say

The government has offered to buy the coking coal that is essential to keep steel production going at British Steel in Scunthorpe, the BBC has been told.

British Steel has been warning for several days that the raw materials needed to keep its plant’s two blast furnaces operational are running out.

Sources said the government was putting the offer in writing to British Steel’s Chinese owner Jingye, which will decide on whether to accept it.

Separately government sources said the materials need to be paid for within the next two days or production will cease at the British Steel plant within weeks and cannot be restarted. The Department of Business and Trade did not comment.

Jingye has said the furnaces are “no longer financially sustainable”.

Talks are set to resume between British Steel bosses and government officials on Thursday, with unions saying the situation is on a “cliff-edge”.

The government has not ruled out nationalising British Steel, which employs 2,700 people, saying all options remain on the table.

Coking coal, which has to be imported, can take 45 days to arrive once it’s been ordered. The plant also needs iron ore but that tends to arrive more quickly than coal.

The government offer to purchase the raw materials is a way for it to buy time while negotiations over the future of the plant continue.

Business Secretary Jonathan Reynolds met with the CEOs of Jingye and British Steel on Wednesday.

In a joint statement, they said ”Both sides welcomed continued cooperation in talks to find a way forward. The UK government thanked Jingye for their respect for the workforce during this process, and work continues at pace to find a resolution.”

Ministers are thought to prefer a commercial solution to secure the long-term future of the plant.

But due to the urgent need to acquire new raw materials, talks about the longer-term future of steelmaking in Scunthorpe are now largely on hold.

The immediate issue is who will pay for shipments of iron pellets and coke.

One option being discussed is whether the government can directly buy the materials using taxpayers’ money.

It is understood that the easiest legal avenue would be to come to a deal with Jingye, whereby they agree to carry on running the plant, as long as the government pays for the raw materials.

When Jingye announced last month that thousands of jobs were at risk, that triggered a consultation period that legally must last a minimum of 45 days.

Government representatives are said to be frustrated with Jingye, at what they see as an effective shutting down of British Steel, with the consultation period still ongoing.

One source involved in the negotiations, who two weeks ago was optimistic about the future relationship between Jingye and the UK government, said they could no longer foresee long-term Chinese involvement in British steelmaking.

One source said the government is now likely to look for an alternative commercial partner, outside of China, to take over the steelmaking operations at Scunthorpe.

Alun Davies, national secretary in charge of steel and metals for the Community Union, said the raw materials issue was an “extreme emergency” .

“We just need them to be paid for, once that happens then there can be further discussions with the government about how we secure steel making for Scunthorpe,” he told the BBC.

Emerging from talks, Linda McCulloch from the Unite union said they would like the government to nationalise the site “to keep steelmaking alive in the UK”.

One of Scunthorpe’s blast furnaces is set to be temporarily shut down next week, in order to buy more time before the raw materials needed to keep the steelworks going run out.

The North Lincolnshire town’s skyline boasts four blast furnaces, all named after English Queens – Bess, Mary, Anne and Victoria.

Bess and Anne are currently the only two steelmaking blast furnaces operational in the UK.

Turning off a blast furnace without making it permanently unusable is notoriously difficult.

A so-called “Salamander Tap” can be used to temporarily shut down a blast furnace by drilling a hole to remove any remaining hot metal.

It is seen as a generally dangerous process, but engineers on site at Scunthorpe are now confident they can carry out the procedure.

The “Bess” blast furnace is currently scheduled to be taken temporarily out of action on 14 April.

This would leave “Anne” as the only remaining operational blast furnace in the country, but would mean raw material stockpiles last twice as long.

Reform UK is calling for British Steel to be nationalised until a buyer can be found.

The Green Party also favours nationalisation and a switch to “green” steel production.

The Conservatives and Liberal Democrats have said other options should be considered first.