British steel furnaces left stranded in China as shipping costs soar
Delivery of one of the world’s largest electric arc furnaces to the Port Talbot steelworks in Wales has been delayed by the Iran war after soaring shipping costs left key components stuck in China.
The giant furnace, which will have a 3.2 million ton annual capacity, is being supplied by Italian firm Tenova, with some sections having to be produced at a Chinese factory as it is the ‘only place in the world’ where they are made.
Indian giant Tata Steel, which owns Port Talbot, insisted the disruption will not affect the timescale of its plan for a £1.3 billion rebuilding of the site, where coal-powered blast furnaces were shut down 18 months ago, as other work can still progress.
Unlike traditional blast furnaces, which use coal to make new steel, electric arc furnaces (EAFs) use high-voltage bolts of electricity to melt scrap metal which can then be recycled back into steel. It is considered a more environmentally friendly method of steelmaking.
The length of the shipping delay has not been revealed but it is likely to be at least several weeks, although Tata says it still expects the furnace to arrive in sections during the ‘summer’ as planned. Shipping charges have soared since the Iran war, with the price of fuel oil 55 per cent higher last week than it was at the end of February.
Vessels carrying newly-completed sections of the EAF will need to be rerouted to avoid the Red Sea and Suez Canal – where there are long-standing problems with terrorism and piracy – travelling on a much longer route around Cape of Good Hope in South Africa. But Tata, whose site was visited last week by Business and Trade Secretary Peter Kyle to launch the Government’s heavily delayed Steel Strategy, said the longer route was always planned.
Hope of a bright future: Port Talbot steelworks is expecting an electric arc furnace
The company declined to reveal details of the extra costs for ‘commercial confidentiality’ reasons but added that it will foot the bill rather than the Government, which is contributing £500 million of taxpayers’ cash towards the new electric furnaces.
Tata Steel said: ‘Whilst the new Electric Arc Furnace technology – being designed and supplied by Tenova from their own specialist factory – is a central component of our move to low-emission steelmaking, it is a relatively small proportion of the total cost of the £1.25 billion project.’
‘We have longstanding and robust project plans to ensure that materials and equipment arrive on site at the appropriate juncture. While the conflict in the Middle East is affecting shipping costs and journey times, our schedule remains unchanged and we remain confident of managing these disruptions without impacting the overall delivery of the project.’
Tata also defended the use of components made in the Far East, saying the specific type of conveyor-fed electric arc furnace chosen for Port Talbot is ‘not manufactured in Europe’ – and would help secure a ‘long-term future’ for UK steelmaking.
The company added that over 10,000 tons of steel for the furnace and infrastructure were being ‘sourced and fabricated from the UK’.
But the shipping delays will fuel concerns about the exposure of the UK’s steel industry to global events and competition from abroad. It comes after The Mail on Sunday revealed last week that Czech state-owned firm CEZ, which has partnered with Rolls-Royce to build a new generation of nuclear reactors, has been pushing for steel components to be made outside Britain, rather than at the Forgemasters in Sheffield.
Concerns about the UK steel industry’s exposure to global disruption have also been fuelled by plans in the Government’s Steel Strategy to power steel furnaces with natural gas, the cost of which has been surging as the war in Iran has disrupted fossil fuel supplies from the Middle East.
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