A new report from the University of Cambridge claims that British steel could be saved, if the industry is willing to transform itself.

We will never need more capacity for making steel from iron ore than we have today.

Julian Allwood

The report, by Professor Julian Allwood, argues that in order to survive, the UK steel industry needs to refocus itself on steel recycling and on producing products for end users. He argues that instead of viewing Tata Steel’s UK exit as a catastrophe, it can instead be viewed as an opportunity.

Allwood’s report, A bright future for UK steel: A strategy for innovation and leadership through up-cycling and integration, uses evidence gathered from over six years of applied research by 15 researchers, funded by the UK’s Engineering and Physical Sciences Research Council (EPSRC) and industrial partners spanning the global steel supply chain. It is published online today (15 April).

“Tata Steel is pulling out of the UK, for good reason, and there are few if any willing buyers,” said Allwood, from Cambridge’s Department of Engineering. “Despite the sale of the Scunthorpe plant announced earlier this week, the UK steel industry is in grave jeopardy, and it appears that UK taxpayers must either subsidise a purchase, or accept closure and job losses.

“However, we believe that there is a third option, which would allow a transformation of the UK’s steel industry.”

Instead of producing new steel, one option for the UK steel industry is to refocus itself toward recycling steel rather than producing it from scratch. The global market for steel recycling is projected to grow at least three-fold in the next 30 years, but despite the fact that more than 90% of steel is recycled, the processes by which recycling happens are out of date. The quality of recycled steel is generally low, due to poor control of its composition.

Because of this, old steel is generally ‘down-cycled’ to the lowest value steel application – reinforcing bar. According to Allwood, the UK’s strengths in materials innovation could be applied to instead ‘up-cycle’ old steel to today’s high-tech compositions.

According to Allwood, today’s global steel industry has more capacity for making steel from iron ore than it will ever need again. On average, products made with steel last 35-40 years, and around 90% of all old steel is collected. It is likely that, despite the current downturn, global demand for steel will continue to grow, but all future growth can be met by recycling our existing stock of steel. “We will never need more capacity for making steel from iron ore than we have today,” said Allwood.

Apart from the issue of recycling, today’s UK steel industry focuses on products such as plates, bars and coils of strip, all of which have low profit margins. “The steel industry fails to capture the value and innovation potential from making final components,” said Allwood. “As a result, more than a quarter of all steel is cut off during fabrication and never enters a product, and most products use at least a third more steel than actually required. The makers of liquid steel could instead connect directly to final customer requirements.”

These two opportunities create the scope for a transformation of the steel industry in the UK, says the report. In response to Tata Steel’s decision, UK taxpayers will have to bear costs. If the existing operations are to be sold, taxpayers must subsidise the purchase without the guarantee of a long term national gain. If the plants are closed, the loss of tax income and payment of benefits will cost taxpayers £300m-£800m per year, depending on knock-on job losses.

Allwood’s strategy requires taxpayers to invest in a transformation, for example through the provision of a long term loan. This would allow UK to innovate more than any other large player, with the potential of leadership in a global market that is certain to triple in size.

He singles out the example of the Danish government’s Wind Power Programme, initiated in 1976, which provided a range of subsidies and support for Denmark’s nascent wind industry, allowing it to establish a world-leading position in a growing market. Allwood believes a similar initiative by the UK government could mirror this success and transform the steel industry. “Rapid action now to initiate working groups on the materials technologies, business model innovations, financing and management of the proposed transformation could convert this vision to a plan for action before the decision for plant closure or subsidised sale is finalised,” he said. “This is worth taking a real shot on.”

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