LONDON — Chinese-owned British Steel said it may eliminate up to 260 U.K. jobs as a result of the proposed closure of its coking ovens in Scunthorpe, as steelmaking in Britain remains "uncompetitive" despite cost cutting.
"We have taken action to reduce costs within our control; however, steelmaking in the UK remains uncompetitive when compared to other international steelmakers," British Steel CEO Xifeng Han said in a statement emailed to CNBC.
"Our energy costs, carbon costs and labour costs are some of the highest across the world, which are factors that we cannot influence directly."
Chinese steelmaker Jingye Group purchased British Steel in March 2020 and says it has invested £330 million ($399 million) in capital projects during its first three years of ownership. British Steel employs 4,700 people, of whom 4,300 are based in the UK.
Last year, the company reported a £120 million increase in its energy bill and a £70 million hike in its annual carbon costs, saying "decisive action" was required because of surging operating expenses.
"Jingye is committed to our long-term future but decarbonisation is a major challenge for our business and, like most companies, we're facing significant challenges because of the economic slowdown, rising inflation and exceptionally high energy prices," the company said.
Energy costs spiked over the course of last year, as sanctions in response to Russia's invasion of Ukraine tightened European access to Moscow's supplies.
The government has been holding protracted discussions over a £300 million support package to British Steel, according to national media reports.
"It is very disappointing British Steel has chosen to take this step for its employees while our negotiations with the sector are ongoing," a U.K. government spokesperson said by email. The British administration has been in talks to agree a long-term solution with British Steel over recent months.
"The negotiations on a support package for our steelworks, worth hundreds of millions of pounds, are still ongoing with the Government. So, I am deeply disappointed that Jingye has taken what is a commercial decision to make this raft of redundancies," said Holly Mumby-Croft, member of parliament for Scunthorpe, in a statement.
"Jingye's actions lead to questions over their commitment to our steelworks and their commitment to the community that they are a part of here in Scunthorpe."
Unions have blasted the announcement, flagging long-term industry risks and potential strike action:
"We will not accept redundancies and nothing is off the table when it comes to protecting our members' jobs," said Alun Davies, national officer at steelworkers' union Community, in a statement.
"British Steel's plan to close the coke ovens could have a catastrophic impact on jobs and steel production at Scunthorpe and the UK as a whole," he noted, flagging the company could henceforth depend on "unreliable imported coke" and put at risk Britain's ability to produce British steel for national infrastructure.
The Unite union called on British Steel must provide further disclosure over Scunthorpe or face potential industrial action.
"This union has not yet seen any financial justification for the closure of the coking ovens. British Steel needs to come clean and open its books in order to try to justify its decisions," said Linda McCulloch, national officer for Unite. "Unite will pursue every avenue, including industrial action, to defend members' jobs at British Steel."