UK steel industry in crisis again

Screenshot 2019-05-27 at 15.04.36

In late May 2019, there was again widespread concern about the future of the entire British steel industry, following the threat of closure of the Scunthorpe works. The wastelands left in many areas by past pit closures, with few alternative sources of livelihood put in place beforehand, are indeed a grim warning. Below are a few notes tentatively exploring what might be a green response to the crisis. The Green Party’s response has been a bit feeble, focusing largely on the demand for a recall of parliament. That begs somewhat big questions about the place of industries such as steel making in a comprehensive strategy for building a sustainable society.

Some of the figures below, especially about steel and energy, are taken from the ‘Claverton’ energy group (David Lowry, Neil Crumpton et al). There seems to be a paucity of data about the whole iron-steel cycle and much of what is readily available comes from industry sources. Heaven forbid that they might take a more rosy view of things than is actually warranted.

There are critical assessments of particular iron ore mines but not much, it would appear, of the cumulative impact of iron ore mining and pig iron production (there is more just on steel itself). If that is the case, it is a sad reflection on the incapacity/unwillingness to monitor the collective impact on the Earth’s life-support systems from a major component of modern living.

Steel Still Needed

Clearly at present we need steel (http://www.eef.org.uk/uksteel/About-the-industry/How-steel-is-made/step-by-step/End-uses-of-steel.htm ). Renewable energy technologies often use much steel, for example. The European wind energy sector consumes 700,000 tonnes of steel a year. About 85% of the wind turbines around the world are installed on tubular steel structures. Steel represents on average 80% of all materials used to construct a wind turbine, including steel foundations. But there are many other good things for which steel is necessary, not least public transport (eg http://www.bordersrailway.co.uk/progress/timeline.aspx). Steel is also one of the most recyclable of materials (http://www.steelconstruction.info/Recycling_and_reuse).

So many are calling for state intervention to save the industry (in the manner of, say Rolls Royce in the 70s: http://www.theguardian.com/business/2016/mar/31/public-ownership-of-tata-steel-could-work-just-look-at-rolls-royce ). After all, at quite enormous public cost the government bailed out the private banks, institutions whose problems were largely brought to a head by their own greed and irresponsibility.

Bank Error Not in Our Favour

An absurd report by the BBC (http://www.bbc.co.uk/newsbeat/article/35933173/steel-v-banks-why-theyre-different-when-it-comes-to-a-government-bail-out) attacked this argument, claiming that “we” (they always confuse the few with everyone) depend on the banks but not steel. This superficial assertion assumes that whatever we want can simply be sourced courtesy of the world market whereas we need the ‘City’.

For one thing, that argument falsely assumes that there will always be sufficient cheap energy to sustain large-scale long-distance trade in bulky materials such as steel. But, more fundamentally, such reports mistake the nature of the two activities. Steel making is about real wealth, the creation of actual physical artefacts with genuine utility value.

Banking is largely about the movement of symbols, tokens that give claims to wealth but not wealth itself. It is a matter of human choice how we arrange the means by which we exchange goods and services as well as account for their value. Money is not worth much in and of itself, except for the minimal value of the paper and metals used in physical currencies. The BBC is guilty of the “fallacy of misplaced concreteness”. [Actually most money is debt but that’s another story!]

What a dump

Many have also been noted that the government has in effect sold out industries such as steel, largely the victim of dumping by China, in return for Chinese investment in such monumental follies as the Hinckley C nuclear power plan. Thus the Queen was rolled out to welcome Chinese autocrat Xi Jinping on a state visit to the UK while George Osborne sucked up to the Chinese government on his visit there. (See: http://www.chinadaily.com.cn/china/2013-10/16/content_17035049.htm )

Apparently, Britain has blocked initiatives proposed by the rest of the EU to deal with Chinese flooding of the world market with below cost steel (export subsidies, tax breaks, cheap state credit…). It’s been even said that, at one point, steel was cheaper per tonne than cabbage in China. In 2015, the giant Chinese state producer Sinosteel (some $16bn in debt) was rescued from bankruptcy. Chinese steel is also the product of hugely polluting foundries, workplaces that are literally and metaphorically ‘sweatshops’ too. (http://www.theguardian.com/environment/gallery/2015/jan/13/hebeis-steel-cities-chinas-pollution-crisis-in-pictures).

Such factors are built into the current world economic system in which there will always be pressure to undercut rivals in one way or another. Yet Labour politician such as Stephen Kinnock (MP for Aberavon, which covers the Port Talbot steelworks) have supported the whole globalisation project. He talks of “confidence in our engagement with the world” so we can win “the global race”. Yet it is a race to the bottom. The steel crisis is to a large extent the product of competition in a rigged race. [It might be remembered that Labour ‘lefties’ such as Clare Short also defended globalisation as ‘inevitable’ etc. [cf: http://bfewster.members.gn.apc.org/politics/glob.htm ]

Not fault of green tax

Various groups are using the crisis to attack green taxes. They noisily assert that such charges have made British uncompetitive on the world market. Friends of the Earth such as the ‘Daily Mail’ and the ‘Daily Telegraph’ have been talking about “Britain’s steel’s green death”. Boris Johnston was also quick to jump on this bandwagon.
Yet energy costs only account for some 15-20% of total costs (https://www.worldsteel.org/media-centre/press-releases/2015/Energy-use-in-the-steel-industry-report-available-now.html) Clearly other costs need to be considered such as local business rates, the burden of current pension commitments, inadequate investment in up-to-date technology…

These are all things where is scope for intervention by a government that understands why the British steel industry cannot be shredded and is prepared to act. The Tories cannot say that there was no warning of what was a looming crisis. It might also be remembered Chancellor George Osborne took Brussels to court for trying to cap bankers’ bonuses – but has shown little stomach for such a fight over steel.

Of course, steelworks such as Port Talbot are big energy users. Apparently, it uses as much electricity as nearby Swansea. Each year its power bill runs to £60m. But a recent study (http://www.carbonbrief.org/factcheck-the-steel-crisis-and-uk-electricity-prices) suggests electricity constitutes 6-8% of the plant’s total production costs. Of this, perhaps 2-3% is due to green policy costs. But because the UK compensates energy-intensive industries for around two-thirds of the impact of these levies, the real cost of green levies at Port Talbot is about 1% of production costs.
UK electricity does cost more than in any other European country but the Tory press exaggerates what difference that makes for our steel industry (https://www.gov.uk/government/statistical-data-sets/international-industrial-energy-prices)

The UK operates a carbon floor price, which it recently but it is now frozen until 2020, which does affect the competitiveness of UK industry with its continental competitors. Overall, green taxes are a small factor in the difficulties of the steel industry.
Indeed EU emissions trading scheme (ETS) had delivered Tata Steel’s European operations a £780m windfall through the over-allocation of carbon credits between 2008 and 2014. Apparently, the Port Talbot works alone received more than £239m over that period (ie £34 million per year). Revealingly in countries such as France where there is a dominant state-owned electricity company, there is more scope to subsidise prices to meet specific economic and social needs.

Jobs

Part of the problem has been past government inaction. For many years the old Port Talbot Borough Council, for example, did nothing to hold the steel industry accountable for the pollution of the area. Accordingly, Port Talbot was one of the most polluted steel towns in the world.

That said, the British steel industry is far more likely to pay decent wages, provide better health and safety conditions as well as try to cut carbon emissions and other pollution than ones in regions such as Eastern Europe or Asia. It might also be noted that wages in the UK steel industry have tended to be above the national average, while jobs in the industry tend to be very skilled.

This stands in marked contrast to growing numbers of precarious, badly paid, and sometimes rather pointless jobs elsewhere in the economy (eg http://www.theguardian.com/business/2015/dec/09/how-sports-direct-effectively-pays-below-minimum-wage-pay). Surely it is better to have people making steel than standing around as bouncers or serving burgers.

But carbon taxes and the like must be preserved, indeed increased. They are critical to success in the fight against excessive climate emissions and ruinous climate change. It cannot be said too strongly and too often that this threat trumps all others. To chart a path to a more sustainable future for the steel industry, we need to put the current crisis in a wider context.

Deeper problems

Though there is clearly an immediate threat from the state of the world steel market, Labour is wrong to treat the British steel crisis as just some temporary blip in the economic cycle, with intervention needed to keep things afloat until the next cyclical upturn. The problem is much deeper, with economic overcapacity on the one hand, thanks largely to Chinese hyper-expansion, but also, on the other hand, a whole global industry that is in ‘overshoot’ in ecological terms.

Most commentary does not put the steel industry into that latter context. Yet it is the most critical one. Steel making is only one part of a material cycle that starts with the mining of the original ore and ends with final use and disposal of steel products. At an abstract level there is a lot of iron ore in the Earth’s crust (c5%). The problem is not sheer availability, though reserves of easily accessible, high-quality ore have become considerably depleted.

Supply must also be set against demand. That and the likelihood declining grades suggest that iron ore will follow, sooner rather than later, the inevitable path of all non-renewable resources: future shortages. So a steel industry based on iron ore mining (as opposed to recycled materials) would rest on somewhat unsustainable foundations. Careful analysis by Chris Clugston of official data suggests that ‘virgin’ supply problems could begin to bite by 2030 (http://www.thesocialcontract.com/pdf/twentyfive-two/tsc25_2_clugston.pdf) This leaves aside issues of access to raw materials from politically unstable regions.

Then there are the ecological and economic costs of mining and refining that ore. Mines have a huge land take. On average, over 2 billion metric tons of raw iron ore are mined annually, with major impacts in term of land loss, air, water and noise pollution.

In poorer countries roads are often carved out across forests and pasturelands. In some cases such as Mongolia, herder communities have been forced. Iron ore mining is a major agent of deforestation in areas such as Brazil whose Carajas mine complex is the largest iron ore mine on Earth. Some trucks there are the size of a house. Indeed the ‘Guardian’ called Brazil’s iron ore programme a “slow-motion environmental catastrophe” (http://www.theguardian.com/business/2015/nov/13/brazils-slow-motion-environmental-catastrophe-unfolds). More mines are being blasted out of the jungle eg https://www.washingtonpost.com/world/the_americas/another-huge-and-open-iron-mine-is-carved-out-of-brazils-rain-forest/2015/04/13/cc1ce49a-cd75-11e4-8730-4f473416e759_story.html More mining often means more rail and port facilities, plus sometimes whole new towns (eg http://www.robinchapple.com/sites/default/files/EPA_Cumulative_Env_Impacts_August_2014.pdf )

All the digging, blasting, loading, crushing, waste rock dumping, transporting and so forth consumes energy, produces dust and other air pollutants whilst generally degrading the environment through ground clearance. Routine disposal of rock waste brings environmental degradation (eg http://nopr.niscair.res.in/bitstream/123456789/17865/1/JSIR%2058(9)%20699-704.pdf) But accidents from tailing dams grossly amplify the problem. They can create a veritable sea of destructive sludge (eg http://www.economist.com/news/americas/21679299-embattled-government-not-helping-much-it-should-growing-environmental-costs and http://thinkprogress.org/climate/2016/03/03/3756140/brazil-dam-burst-pay/ ). Abandoned mines can create acid water pollution (http://www.groundtruthtrekking.org/Issues/MetalsMining/AcidMineDrainage.html). The problems are far from restricted to countries with poor environmental standards and enforcement eg https://www.earthworksaction.org/files/pubs-others/IronMiningEnviroTrackRecord-201301-SC.pdf.

Every bit of iron ore used to produce a tonne of steel gives rise to an average of about two tonnes of greenhouse gas emissions. That is partly due to mining and transport, but mostly due to the smelting/refining with coking coal. The amount of water discharged each year to the environment from mines is also increasing substantially as mines get bigger and deeper. Generally, the poorer the grade of iron ore (and this will always be the long-term direction), the more energy, more water, more emissions, and more mine wastes there will be.

Post-mine comes the making of pig iron and steel. The impacts at this stage of the cycle are perhaps more generally known, from water consumption to the emission of nitrogen oxides, sulphur dioxide and dust. The quantitatively largest airborne emission from the steel plants is carbon dioxide, however. The world’s consumption of iron and steel constitute 6% of global carbon emissions (http://www.carbontrust.com/media/38362/ctc791-international-carbon-flows-steel.pdf)

Steel has some significant advantages from an environmental point of view yet comparison with other alternatives such as wood involves some difficult assessments eg http://www.treehugger.com/sustainable-product-design/does-steel-construction-have-a-lower-carbon-footprint-than-wood.html). On average, emissions are around 2t CO2 per tonne of steel produced using the blast furnace route. However, the emissions vary significantly between countries. In some countries such as Brazil, use of charcoal badly aggravates the emission problem (https://www.sciencedaily.com/releases/2015/02/150209122846.htm )

Limits to growth again

At the end of the day it has to be remembered that steel depends on finite resources and there will always limits to how much can be recycled in practice (technological recycling often depends on large-scale transportation too).

To be fair to the steel industry itself (as opposed to the mining sector), there seems to have been considerable progress in some countries particularly with regard to air pollution. There would also appear to be a number of promising initiatives eg http://www.eurofer.org/Sustainable%20Steel/Closed%20Loops_Steel%20Production.fhtml?wtd=UnV20xTqNoQvEGZ0&sid=-1859055699; http://carbon-pulse.com/17894/; https://www.worldsteel.org/dms/internetDocumentList/bookshop/Sustainable-steel-at-the-core-of-a-green-economy/document/Sustainable-steel-at-the-core-of-a-green-economy.pdf; http://www.scientificamerican.com/article/cleaner-cheaper-way-to-make-steel-uses-electricity/; https://coalactionnetworkaotearoa.wordpress.com/2013/04/24/can-we-make-steel-without-coal/

Electric arc furnace production from scrap steel seems likely to become the norm. Expansion of the ‘secondary’ steel route seems critical. Steps to it might include greater efforts on the design front to make steel products more readily recyclable. Some commentators have suggested that the industry could move ‘downstream’, making more components, rather than just steel itself.

But, of course, markets for such production have to be stimulated. Such possible steps forward will not happen if things are left to the ‘market’. Only direct state intervention, via grants, subsidies and special purchasing policies, will make them happen. It is also the case that carbon taxes can actually stimulate energy-saving and pollution-cutting efforts.

We certainly need to encourage innovations in electricity production. The longer term road to steel with a lower carbon footprint is perhaps to create links to new renewable energy development (http://www.goodenergy.co.uk/media/W1siZiIsIjU2MjRkMWRkYjBkY2Y3MDAwYzAwMjZkMyJdXQ/WindandsolarreducingconsumerbillsAninvestigationintotheMerit….pdf ). Electricity use in UK-based iron & steel production was 3.8 TWh/y in 2014. It would require some 1.5 GW of new wind capacity to deliver that energy (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447632/DUKES_2015_Chapter_5.pdf ). One emerging possibility is that of floating wind turbine platforms. It looks as if they might deliver more energy per ton of steel than traditional ones.

Green protectionism

But none is this will work unless action is taken to control so-called free trade and the scope for dumping that, in practice, it is creating. Clearly few people ‘want’ steel per se. They want the products such as the buildings steel is used to create. Businesses that supply those products will always be likely to turn to the cheapest steel suppliers until governments intervene to change the ‘playing field’, not least via anti-dumping duties.

There is one last danger. It is that concern for steel jobs, coupled to a one-dimensional enthusiasm for ‘renewable’ energy schemes, takes us down wrong paths. Thus arguments are circulating that construction of HS2, even new Trident submarines, would demand a lot of steel and that could save British steel. Such programmes would be disastrous regardless the source of the steel or how low-carbon it is.

Similarly it has claimed that giant renewable schemes in the form of, say, mega-barrages on the Severn could cheaply power the Port Talbot steelworks, saving at least that part of the industry. Yet they too could come at too high an ecological cost (eg http://www.wildlifetrusts.org/sites/default/files/Severn-barrage-report.pdf; http://www.wildlifetrusts.org/blog/joan/2015/03/02/more-tidal-lagoons-proposed-opportunity-or-threat; http://www.wwf.org.uk/filelibrary/pdf/turningthetide_full.pdf) There may be scope for reducing some of these negative impacts (http://nora.nerc.ac.uk/9776/1/WOLF_-_environmental_impacts.pdf; http://www.theecologist.org/News/news_round_up/2983549/revolutionary_sea_fence_promises_tidal_power_price_crash.html ; http://www.wired.com/2016/04/corpower-buoy/ )

But we should not dive straight into such schemes, especially large-scale ones where there is the additional danger of crippling cost overruns. We need to see things in the round, not least giving due consideration to the needs of non-human species. The issue is the long-term common good, not the sectional interests of any group in society.

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