The government is considering a “financially dubious” high-tech fix to solve its central steel dilemma: how to go green without losing the UK’s primary steelmaking capability. As Business Secretary Peter Kyle backs a move to electric arc furnaces (EAFs), a green hydrogen-powered “Direct Reduced Iron” (DRI) plant is being floated as a solution.
The problem is stark: Kyle’s preferred EAFs are clean but can only melt scrap steel. This would mean scrapping the UK’s last blast furnaces and, with them, the ability to make virgin steel from iron ore—a capacity the government had pledged to save.
The DRI plant is the proposed compromise. It would use clean hydrogen to process iron ore into a form that EAFs can use, theoretically delivering both green and primary steel. However, the original text notes that “industry sources have cast doubt on the financial viability of such an arrangement.”
This skepticism is a major problem for the government’s new steel strategy, due in December. The £2.5bn steel fund intended for such investments has already been “drawn down” by “hundreds of millions” in bailouts for British Steel and Liberty Steel. There may not be enough money left for such an expensive and unproven project.
Peter Kyle’s backing for EAFs at Scunthorpe seems firm, but this compromise will be heavily scrutinised. Unions are insisting that primary steelmaking be maintained, forcing the government to find a way to pay for this costly technological bridge.