Steel has been in the news in the UK recently, after the announcement of changes at Tata’s Port Talbot plant. They plan to close loss-making steel furnaces and invest instead in more sustainable electric arc furnaces that will recycle steel. The news around this has focused on the job losses in the area, and the perceived blow to Britain’s sovereignty if we make less of ‘our own steel’.
If we take a step back from that, there’s an under-reported story here about the circular economy and our failure to understand it.
Here’s what currently happens in the UK when it comes to steel. First of all, Britain needs to import millions of tonnes of iron ore. This mainly comes from Sweden, South Africa, Canada and Brazil. Then we need the coal to turn this ore into steel. Coking coal comes all the way from Australia and the United States. Until very recently, Britain imported both coal and iron ore from Russia.
Using these materials, Britain produces 40-50% of the steel that it needs and the rest is imported. The steel produced in the UK doesn’t really make money. The plant in Port Talbot lost £1.7 million every single day in 2023. Nevertheless, that is how we get the steel that we need for manufacturing, infrastructure, etc.
This isn’t great – an uneconomic industry that relies on long international supply chains. It gets worse, because the really big failure is at the other end of the chain. Every year infrastructure is retired, cars are scrapped and so on. Steel is endlessly recyclable, so all of that has value. It can all go back to furnaces to make new steel. But not in Britain. Here, 80% of our scrap steel is exported. It goes to Turkey, Egypt, India or Pakistan for sorting and processing.
Most countries don’t do this. “The UK is unusual in using so little of its own material domestically”, says a recent report from the industry. The country is essentially “stripping itself of a vital resource at a time of rising domestic demand.” This is particularly strange when you calculate that Britain produces 10 million tonnes of scrap steel every year, which is enough to meet all our needs if it were recycled properly.
This is something that I write about in my book The Economics of Arrival. There is an ‘enough’ point for materials such as steel. When you’re growing rapidly, you need more and more steel every year – see China. In a mature economy, you reach a point when there is enough steel in circulation in a country that you can meet most of your needs by reusing it. You just have to spot the opportunity and reorganise industry towards recycling.
Britain is now at that point. Our steel industry has ‘grown up’. Unfortunately conventional economic models don’t recognise that sort of thing, and growth is all that counts. Hence all the flailing and fretting about what is ultimately a good thing: when it comes to steel, we have met our needs.
The industry already knows this, which is why Tata are reorganising around scrap. Their new arc furnaces will use recycled metals from the UK, using electricity rather than coal. This is cheaper and therefore actually profitable, ultimately saving jobs in the UK industry.
Under this circular steel system, gone are the emissions from burning coking coal, and also from shipping it across the world. We also save the emissions from mining and shipping ore. We save the emissions from sending our scrap metal to developing countries too, and the pollution from processing that scrap at plants with lower environmental controls than we have in the UK.
None of this is an absolute – there would still be imports and exports and there’s no need to look for total self-sufficiency. You can still import steel for major projects and to cover losses in recycling. But ultimately the future is much more circular. As I say, the industry knows this already, as described in the UK Steel report mentioned above. It’s government and public perception that need to catch up.
A circular economy for British steel would be cleaner, more resilient and more profitable. It would even be better for Britain’s sovereignty – we’d be meeting our needs with our own scrap and our own renewable energy rather than depending on raw material and coal imports. How we do it matters, with a just transition approach that helps to retrain workers and protect communities. But it would be madness not to do it.
The Earthbound Report 