Decarbonisation: an opportunity and a challenge for UK steel – Insights from Chris McDonald

Chris MacDonald, Chief Executive Officer Materials Processing Institute

By Chris McDonald Chief executive at the Materials Processing Institute

As the UK steel industry begins another year – against the backdrop of a new EU/US tariff-free deal – Chris McDonald, chief executive at Middlesbrough’s Materials Processing Institute, looks at the sector’s future in an increasingly sustainable world.

In recent years, the UK steel sector has rarely been out of the headlines, thanks to threats to production and employment, particularly following the unnecessary closure of the Redcar steelworks in 2015.

Readers could be forgiven for thinking these problems are an inevitable consequence for what is often mis-portrayed as an outdated industry but, compared with other advanced economies, the travails of our steel sector seem to be a uniquely British problem.

Competitors are creating sustainable and decarbonised sectors through new steel plants in the US, the Netherlands and Sweden, while there is government support for innovation and capital investment in Germany, Austria and Spain.

Domestic producers are losing market share due to factors like British energy prices set at double those of France and Germany, unfair competition from steel dumping and US trade tariffs levied against Britain, but now dropped against the EU.

That helps explain why UK content is being displaced by European imports primarily from the Netherlands, Spain, Germany and Italy rather than – as usually assumed – from Asia.

Our response matters because steel is the bedrock of any advanced economy, supporting manufacturing supply chains in aerospace and automotive. It is also essential to Britain’s sovereign capability.

We saw this during the COVID-19 pandemic, when supermarket shelves were kept stocked with tinned food from the tinplate lines in South Wales and Nightingale hospital beds were made from steel tubes manufactured in Corby, Northamptonshire.

Decarbonisation is both a challenge and an opportunity; while responsible for nine per cent of UK carbon emissions, steel is also fundamental to every major technology necessary to deliver net-zero.

A McKinsey report, published in January 2021, describes how “the transition to a net-zero economy will be metal intensive”, and how existing and innovative, new boundary-pushing steel products are essential for solar power, electric vehicles, offshore wind, hydrogen generation and more.

Britain, and the North East in particular, has a trump card to play thanks to advanced innovation capacity, not least as two-thirds of the steels made in Britain were invented in the last 15 years, and are focused on higher-value, specialist steels.

As the UK’s national steel and metals innovation centre, the Materials Processing Institute is well placed to develop the required technologies with world-leading expertise and facilities, £22 million of support from the Government for decarbonisation and industry transformation, plus our proposal for an essential new £12 million hydrogen steelmaking pilot facility to make the next technological leap possible.

Steel remains a vital strategic industry.

If Britain is to transform productivity, safeguard sovereign capability, deliver on commitments made at COP-26 and take a leading role in delivering the green industrial revolution, then the Government and industry need to come together to create a competitive and sustainable business environment and industrial policy for steel.

The North East is the UK’s leading location for vehicle electrification; no other region can compare to our credentials.

This was further strengthened by the £3.85 billion worth of electrification investment that landed in the last 12 months, which includes Britishvolt’s gigafactory in Cambois, Northumberland, Nissan’s flagship EV36Zero electric vehicle hub (that includes Envision’s 9GWh gigafactory) and Turntide Technologies’ three acquisitions.

We also boast significant research capabilities.

The UK’s Driving the Electric Revolution (DER) programme is being led by Newcastle University, which will see the establishment of the DER Industrialisation Centre North East.

The Advanced Propulsion Centre, funded by the Government to make the UK a centre of excellence for the research, development and production of low-carbon propulsion technology, also has an electric machine spoke at Newcastle University.

In total, 17 of the 21 automotive related research centres in the North East are focused on electrification.

It’s clear the consumer is ready to switch to electric. However, there are still challenges if we are to fully maximise this trend.

We need to make sure the supply chain is in place.

Brexit means we must adhere to rules of origin. Therefore, it is critical we have the supply chain in place to avoid lengthy customs declarations and avoid any unnecessary tariffs.

This is particularly true of the battery supply chain, where we must ensure we have UK supply of the critical components.

Recent announcements, including cuts to both purchase incentives and grants for home chargers, highlight that the structure is not in place at the moment, and we have to be careful that sales are not outstripping the supply of infrastructure.

We are expecting up to 12,000 new jobs to be created in the automotive sector in the next three to four years.

With the implementation of new and green technologies, this is an exciting time for the sector. The North East will be a major player in delivering the Government’s net-zero agenda and we expect to see more investment within the region on the back of the recent announcements.

Our vision is that the North East becomes the location of choice for automotive investment in Europe, which will see us recognised as a true automotive powerhouse with a very dynamic, forward- looking and competitive supply chain.

All of this will be underpinned by strengths in research, development and innovation in new automotive technologies and manufacturing processes.

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