NEWS | Eve Lucas | Dec 2023
The future of steelmaking which has been a major employer in Wales looks precarious. Tata and the unions are in discussion over proposals that will involve cutting over 3,000 jobs in the first half of 2024 at the Port Talbot plant. These proposals involve removing existing blast furnace capacity and constructing an electric arc furnace with the aim of decarbonising a key part of the works. Unions including Community, Unite and GMB have put forward alternative plans with proposals for a longer transition period in order to safeguard jobs whilst converting production to greener methods.
A policy brief authored by CEP’s Professor Karen Turner and Cardiff University’s Professor Max Munday highlights some of the key opportunities and challenges for the plant and the steel industry to evolve in line with the UK’s and Wales’ net zero ambitions. Whilst Tata Steel is currently focusing on electric arc furnace technology as the way forward, they are also considering other routes to decarbonisation, such as carbon capture and storage, and green hydrogen-powered furnaces, which the briefing explores.
The contribution of steel manufacturing – what is at risk from industry change?
As with any transition period in any industry, change brings a risk to employment. Our research highlights the number of jobs at stake in steelmaking, with around 8000 people currently employed in the sector in Wales and another 2000 jobs in related activities such as metal casting.
There are also wider economy impacts to consider. A downturn in the steel industry poses a major threat to the wider Welsh and UK economies. A study by Pinto & Jones (2013) showed that for every £1m of output, a further £0.5m of output was supported elsewhere in the country. On the world-stage, Tata exports steel to multiple countries, crucially including the supply of steel as inputs to other UK industries that then export products to the EU and elsewhere. In these ways, the steel industry is embedded into multiple supply chains and sources of income generation in the Welsh and UK economies and its loss would have major economic implications.
Future technological options and market opportunities
In terms of decarbonisation, Tata Steel has a few options: use of electric arc furnaces, decarbonisation of material inputs, use of hydrogen power, and CCUS. The CEP briefing highlights the strengths and weaknesses of each route.
Electric arc technology would come with the benefit of a major reduction in production point emissions (assuming that the electricity used is produced by renewables). It could also reduce aggregate Welsh and UK consumption related emissions (in addition to the production related emissions that are the focus of the legal commitments of the UK and other nations). On the other hand, this may come with a reduction in both output and the labour requirements in producing steel. Thus, the likely outcome is a reduction in employment at Port Talbot, consistent with the recent announcements on job losses. There are also quality issues associated with the use of scrap steel and wider emissions implications given that the scrap supply would rely on the production of virgin steel elsewhere in the world. On the other hand, the UK could position itself as a centre for scrap steel reprocessing in a circular economy which would contribute to reaching net zero targets.
Decarbonised hydrogen fuel and on-site carbon capture could also offer a route to a greener steel industry. These technologies could safeguard higher levels of exports, and in turn direct and indirect employment. Nonetheless, growth in jobs is unlikely due to the capital-producing efficiency of such technologies. This route would also necessitate significant levels of investment in adapting production methods and in establishing a sufficient supply of decarbonised energy. Some, including H2 Green Steel, have also warned that the UK currently lacks the volume of affordable green hydrogen required to make the switch. However, if realised effectively, this route would reduce both production and consumption emissions.
Regardless of which technologies are employed, there is a potential for the Welsh steel industry to bolster its output by servicing emerging markets that require green steel, such as production of electric vehicles and renewable energy technologies. A growing demand could lead to premium prices for green steel versus traditional steel. If Wales can lead in servicing and harnessing this potential market, it could provide some industry security for decades to come and avoid the offshoring of jobs and emissions. However, this will require sustained coordination between government, industry and unions to understand and address the inevitable trade-offs and risks – particularly around job losses - as well as to leverage the opportunities.
Image credit: Clint Budd, flickr.com