British Steel warns of 2,700 job losses from blast furnace closures

LONDON (Reuters) -China-owned British Steel said it could close its two blast furnaces as soon as June with the potential loss of up to 2,700 jobs, as U.S. tariffs and environmental costs threaten to damage its already struggling operations.

British Steel, owned by China's Jingye Group, has warned for years that steelmaking in Scunthorpe, north east England, is loss-making, and has been in talks with the government for months about securing funding to switch to a greener type of steel production.

But the two sides have failed to reach a deal, and British Steel said on Thursday it was making the "difficult decision" to start a consultation over the closure of its blast furnaces and other related operations.

The threatened closures are the culmination of decades of decline in Britain's steel industry, which has struggled to compete with low-cost imports given the high energy costs of domestic production.

"The blast furnaces and steelmaking operations are no longer financially sustainable due to highly challenging market conditions, the imposition of tariffs, and higher environmental costs relating to the production of high-carbon steel," British Steel said in a statement on Thursday.

U.S. President Donald Trump imposed global tariffs of 25% on all imports of steel on March 12, dealing another blow to British Steel, which said its Scunthorpe operations are losing 700,000 pounds ($905,240) daily.

Britain's steel exports to the U.S. are worth more than 400 million pounds a year, according to industry body UK Steel, or about 5% of UK steel exports.

British Steel said it was beginning consultations with unions, and the proposed closures could impact between 2,000 and 2,700 jobs - subject to consultations - with June the earliest possible date for closure. The site employs 3,500 in total.

British Steel said it would continue working with the government to explore options for the business. Britain's business minister Jonathan Reynolds said the pair were in "continual negotiations", and he was focused on getting the right deal for taxpayers.

"I need guarantees on jobs if I'm putting public money in," he told an event on Thursday.

Steel was first made at Scunthorpe in 1890 and if the closures go ahead, Britain, which in the nineteenth century was the world's biggest steel producer, would no longer have any blast furnaces.

The country is instead shifting to less carbon-intensive electric arc furnaces, which make new steel from recycled steel.

That switch is expensive. It is investing 500 million pounds into Tata Steel in Port Talbot, Wales, to build a new electric arc furnace due to open in late 2027 or early 2028. Blast furnace closures there resulted in about 2,800 job losses.

The offer British Steel rejected was a 500 million pound government investment, Sky News reported.

The government has earmarked 2.5 billion pounds for the steel industry and is due to publish a strategy on its plans for the sector in Spring 2025.

($1 = 0.7733 pounds)

(Reporting by Sarah Young in London and Anandita Mehrotra in Bengaluru, additional reporting by Catarina Demony; Editing by Shounak Dasgupta, Kate Holton and Jan Harvey)