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Innovation the key to future of UK steel industry

By Chris McDonald, Chief Executive, Materials Processing Institute

A commitment to innovation has to be at the heart of any co-investment deal between government and the UK Steel industry if the sector is to truly compete on a global scale.

While the future of Tata’s Port Talbot Steelworks still hangs in the balance and European Political leaders debate the overcapacity of steel on the international market, the UK sector is making moves that can provide it with a new and sustainable future.

Investment fund Greybull’s decision to invest in the Long Products Division, which includes facilities on Teesside and will also see the return of the British Steel name, is a positive reflection of the interest that remains in the UK steel industry. However, without a commitment to innovation the sector is destined to remain in its current depressed cycle no matter what the levels of global stock piles.

The steel industry is on the cusp of a paradigm shift in technology, moving from the large integrated, high economies of scale assets that exist, to new mini-mill type operations. These new operations are based around Electric Arc Furnaces, they are high technology, high flexibility, low capital cost facilities, utilising 100 percent recycled raw materials and giving a step change improvement in carbon emissions.

The gradual decline of many existing steel assets is opening the door to the introduction of these new technologies and, by having an environment in the UK that is open and welcoming to new investment in these steel producing technologies, it would be possible to capture the European market in steel production.

The UK is ideally-placed to be the leading nation in switching to this new technology. Having a large market and growing market for steel, a ready and available supply of raw material and, through universities and the Materials Processing Institute in Middlesbrough, the expertise and innovation capability to make this shift.

Britain is currently the fourth largest exporter of steel scrap in the world and the greatest exporter on a per capita basis. This is a valuable raw material, which, if retained and processed in the UK, becomes a high value export product, significantly improving the UK’s balance of payments and providing a draw for inward investment in advanced manufacturing.

It is important to recognise that the UK is well-placed to be the leading European nation in this switch to new steel production technologies, but if investments are made first elsewhere in Europe, it would close the door to realising this technology shift in the UK.

Inward investors are currently looking for opportunities to set up such facilities in Europe and if this were to happen in one of the other European nations we would see an increase of steel imports into the UK and a gradual shift of high value manufacturing from the UK to territories that can provide the advanced steels needed.

To support this essential shift in the UK industry, the Materials Processing Institute, along with its partners, TWI and the Institute of Materials, Minerals and Mining, have made a proposal to establish a new Materials Catapult for the UK. The proposal is currently under consideration by Government. The materials industries are currently not supported under the Government’s catapult network, but they have specific innovation needs and are the essential underpinning of UK manufacturing.

The proposal partners have demonstrated strong cross-sector industry support for the Catapult, including from leading industry bodies, such as CBI, EEF and FSB.

The Catapult will focus on improving productivity in the UK materials industries to keep them at world-leading levels of competitiveness. It would provide the translational support for the commercialisation of research from UK universities, to ensure that the benefits are realised within the UK economy. The Government has announced investment of over £300 million in materials research at the new Royce Centre at the University of Manchester, but without the Materials Catapult, the UK will not have the capability to bring this research to commercial reality and the benefits will be exploited elsewhere.

Finally, it is recognised that there are a larger than average number of SMEs in the materials industries and the Materials Catapult partners have developed specific measures to help these firms grow and become the internationally competitive large businesses of the future.

It is accepted that some form of intervention may be required to ensure the continued operation of the Tata Steel UK assets, whilst a new buyer is found. The rationale for this can be purely economic and prevent the industry falling further behind its international counterparts.

Supporting this transition would enable the UK steel industry to springboard to a new asset configuration, based on 100 percent recycled, low carbon, high technology and flexible, mini-mill type operations.

A key enabler to make this happen is the proposed Materials Catapult, urgently called for across the UK materials industries, which could be implemented nationally, with immediate effect by the Materials Processing Institute and its partners.

This renewed focus on innovation would recognise the essential role that the steel industry plays in supporting UK manufacturing and the opportunity for the Port Talbot Steelworks and others across the country to be internationally competitive global steel players.

3 May 2016