British Steel’s mistake forced the closure of the Scunthorpe blast furnace

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British Steel was forced to close one of its two blast furnaces in Scunthorpe last year after using the wrong type of coal, in the latest sign of the crisis engulfing the Chinese group’s UK operations .

The debacle raised initial fears among some government officials that British Steel might try to sabotage its own loss-making plant, but ministers have been reassured that the shutdown was due to a management error.

The disclosure comes as it emerged that British Steel has abandoned plans to restore steelmaking on Teesside, as part of a restructuring supported by the government of the company’s operations to move to greener forms of production.

Initial plans put forward by the company, which is owned by China Jingye, had called for one electric arc furnace to be built in Scunthorpe and one in Teesside, but people familiar with the situation confirmed that the aim was now to build two on the Lincolnshire site.

Lord Ben Houchen, Conservative mayor of Tees Valley, said the Labor government opposed the idea and instead favored concentrating new British Steel electric arc furnaces at its existing Scunthorpe plant.

“It’s disappointing,” Houchen told the Financial Times. “Clearly there was a conclusion by the Labor government and the unions not to come to Teesside.”

Allies of Jonathan Reynolds, business secretary, said the future structure of the business was a business decision for British Steel, but noted that Teesside had been shown to be an attractive location for inward investment.

The company’s decision to abandon plans to build a ‘green’ furnace on Teesside and another at its main works in Scunthorpe was first reported by the Sunday Times.

The problems with British Steel’s ‘Queen Anne’ furnace in Scunthorpe arose last year after the company began importing coking coal after closing the coke ovens that feed its two furnaces in 2023.

The engineers mistakenly used coke that was a mixture of “low quality and low condition,” and that led to the inactive furnace, according to several people familiar with the situation.

The shutdown raised initial concerns in the government that British Steel might have tried to damage its own plant to justify closing its loss-making UK operations, according to people briefed on the issue.

But a government insider said Reynolds thought it was due to “incompetence and cost-cutting” rather than any malicious intent. Engineers misunderstood the complexity of the company’s demanding blast furnaces, said a second person familiar with the situation.

Discussions between the government and the company on the scale of the support package for the restructuring of its operations remain ongoing. British Steel’s latest accounts, presented last year, showed that Jingye had injected £100m of equity into the business by October 2023.

British Steel has said it is seeking more than the £500m it has agreed to for Tata Steel’s Port Talbot plant in Wales to build an electric arc furnace. The government has said it will invest £3bn, including the £500 million for Tatain Britain’s steel industry over the next decade.

Union representatives said their priority was to keep the blast furnaces open as long as possible. Electric arc furnaces are less carbon-intensive, but they also employ fewer people and the transition to greener forms of steelmaking could put up to half the 4,500-strong workforce at risk.

Alasdair McDiarmid, assistant general secretary of the Community union, whose members include steelworkers, said it was “imperative that two blast furnaces are retained in Scunthorpe to facilitate the transition to new technologies on site” .

“This is a priority for us as a union and is at the heart of the proposals we have presented to Jingye, and we are now awaiting the company’s response.”

British Steel declined to comment on the reasons why the Queen Anne furnace went down, but said both furnaces are now operating. It continues to buy “raw materials to support iron and steel manufacturing.”

The company, he added, was in “ongoing discussions with the government about our decarbonisation plans and the future operations of our UK business”. Although progress continues, “no final decision has been made,” he said.