Middle East turmoil forces British Steel to halt new orders

The UK’s biggest steel-maker has paused new orders from its customers after the outbreak of war in the Middle East caused global energy prices to soar.

British Steel, which has been under Government control since April last year, told clients it would not be making new deals to supply structural steel while it assesses how the conflict will affect the price of energy and materials, The Mail on Sunday understands.

The firm runs the UK’s last blast furnaces at Scunthorpe, North Lincolnshire, and can produce up to 3.2 million tons of metal a year.

It threatens to deal another blow to the UK’s troubled steel sector, which employs 34,000 people and has been hit by US tariffs and the threat of EU trade restrictions, as well as domestic green tax rises that will push costs up further.

Pause: British Steel told clients it would not be making new deals to supply structural steel while it assesses how the conflict will affect the price of energy and materials

The order halt means taxpayers could end up paying millions to subsidise the Scunthorpe plant and the company’s rolling mills as production lines sit idle.

A source said the industry was ‘braced for price rises’ as the price of oil soared to over $90 a barrel last week – its highest level in two years and the biggest jump since Russia invaded Ukraine in 2022. Natural gas prices have also risen 81 per cent since the start of the year on fears of a supply crunch.

‘We are concerned – we already have the highest energy prices in Europe,’ a separate source for the wider steel industry said.

It comes as Iranian attacks saw shipping grind to a halt in the Strait of Hormuz, which links the Persian Gulf to the Arabian Sea, and through which a fifth of the world’s oil passes in tankers.

Pressure was already mounting on UK steel-making due to a 25 per cent tariff on steel exports to the US, as well as new levies and import quotas from the EU which are due to come into force in April.

And green taxes proposed by the UK government could see taxpayers covering a £500 million-a-year bill for Scunthorpe’s blast furnaces, steel industry bosses fear.

The levies stem from a looming change to an emissions trading scheme known as the Carbon Border Adjustment Mechanism, forcing firms to buy permits covering their carbon dioxide emissions.

Domestic heavy industry is exempt, but a new version of the scheme could see it brought within the scope of the tax next year.

Frank Aaskov at trade body UK Steel said: ‘Many steelmakers will be deeply concerned by the sharp increase in gas and electricity prices over the past week.

‘The Government should introduce a wholesale electricity market rebalancing mechanism to ensure UK industrial power prices are brought into line with those faced by competitors in countries such as France and Germany.’

However, steel boss Sir Andrew Cook said the crisis in the Middle East could provide a ‘greater, long-term benefit’ to UK firms if cut-price Chinese steelmakers were also hit by soaring energy prices.

The head of William Cook Holdings, a producer of steel castings, added: ‘Anything that impedes China’s destructive assault on the British steel industry and its markets is good for Britain. By throttling China’s Iranian oil supplies, the conflict helps to starve China’s steel production.’

Labour’s handling of the sector has sparked outrage after it emerged that a series of big contracts had been given to foreign steelmakers. The Department for Business and Trade has been contacted for comment.