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The British government has offered to buy the coking coal for British Steel that is needed to keep the country’s last blast furnace facility open while it negotiates a deal with its Chinese owners.
The move would allow the company to prolong production at the remaining furnaces at its main site at Scunthorpe in Lincolnshire while the future of the plant is resolved, said people familiar with the matter.
The offer comes as part of talks this week between British Steel’s owner Jingye Group and business secretary Jonathan Reynolds to discuss options to stave off a collapse of the lossmaking company.
Talks between the two sides are set to resume on Thursday afternoon, the people said.
The company is preparing to idle one of its two blast furnaces as soon as next week to preserve raw materials. Coking coal and iron ore need to be imported and can take weeks to arrive.
Shipments of coking coal and iron pellets have arrived in the UK but not yet been fully paid for, according to one person familiar with the matter.
Jingye last month rejected a £500mn taxpayer support package from ministers to help it move to greener forms of production.
The government has said all options, including nationalisation of the steelmaker, are on the table as it seeks to avert the loss of 3,500 jobs.
British Steel is the UK’s last remaining producer of primary steel after Tata Steel closed its two furnaces last year. The industry is struggling with high energy costs and international competition.
Alun Davies, national officer at the Community steel union, said the priority for workers was to “see a deal done”.
British Steel and the Department for Business and Trade said in a joint statement on Wednesday that “both sides welcomed continued co-operation 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.”
UK officials have been examining options to purchase raw materials such as coking coal and other iron materials to keep the furnaces running after Jingye stopped orders of the critical inputs.
Idling would allow the furnace to be kept at a certain temperature, enabling it to be restarted within six weeks as opposed to a permanent closure where the furnace is allowed to cool completely.
Culture secretary Lisa Nandy told the BBC on Wednesday morning that a “commercial solution” for British Steel was “achievable and within sight”.
Unite, the union, urged ministers to renationalise British Steel if the government failed to agree a deal with Jingye. Sharon Graham, general secretary, said it would be an “economic catastrophe if the worst were to happen and government was to allow British Steel to collapse”.
“The government must also use its buying power to put UK steel at the heart of major UK infrastructure projects as part of a joined up industrial strategy that supports UK manufacturing,” she said.
The negotiations are occurring in the wake of tariffs imposed by US President Donald Trump of 25 per cent on steel and aluminium exports to America. Much of British Steel’s product is sold domestically.
British officials are examining whether the UK needs to retain domestic primary steelmaking capacity given the potential impact of Trump’s tariffs on supply chains, according to people familiar with the matter.
That would require the continued operation of blast furnaces in the medium term. The alternative is less carbon-intensive electric arc furnaces that melt down recycled steel but cannot produce steel from scratch.
The government is expected to issue its verdict in the steel strategy that it has promised to publish by the end of spring.
