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After the government stepped in dramatically to seize control of the company, British officials and industry experts began working on the “investment case.”
According to two people familiar with the situation, the minister is concerned that there is currently no “endpoint” that controls China-owned steel manufacturers.
“The challenge right now is that there are no endpoints unless you find a third party,” one of the people said.
The focus was on finding private sector investors for British Steel, but added, “We needed to tackle the long-term demand side and (show) a sustainable business case.”
Actions on energy costs have long been a challenge for the steel industry, with producers paying 50% more electricity than their French and German competitors, but people see it as essential to this.
The work is being carried out in collaboration with the Steel Council, which was launched by the government at the beginning of the year to advise on how to rebuild the industry.
The Business and Trade Public Relations Department said: “We acted quickly to ensure the continued operation of our explosion reactors, but we recognize that private sector investment is necessary to ensure the long-term future of British steel.
“We are working closely with Jingye and various third parties regarding future options, and will continue to work on determining the most long-term, sustainable future on our site.”
Business Secretary Jonathan Reynolds has been seeking new entrants into the UK steel industry for months, even before the crisis escalated with British Steel.
The US is now considered one obvious option given the number of steel companies based there and the previous interests some of them have shown in earning their footprint in the UK. The Minister has previously explained that American steel groups are “best in their class” thanks to cutting-edge technology.
Authorities warned that it would likely take some time to find a buyer for British steel, but stressed that work on this has begun.
Reynolds caused a recall of parliament on Saturday, passing an emergency law, allowing the government to assume control of British Steel after consultations with Chinese parent Jinzi.
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The government has put aside £2.5 billion to invest in the industry as part of its Green Steel Fund. An industry expert said there was approval from the minister that investment offers should include government support.
Reynolds provided £500 million to Jingye to rebuild its operations and invested in two carbon-intensive electric arc furnaces.
A banker in one industry said that despite the sector’s current uncompetitive electricity prices, if the UK seals off its trade agreement with the US over import duties, there could be a emergence of trustworthy bidders. US players, including Nucor, have pioneered the use of electric furnaces, he said, but European investors may also take a look.
“What do you not like? You can have a government that is eager to build an electric furnace next to the current explosion furnace on the Scunthorpe side of British Steel, benefiting from the subsidies, getting ready-made customer base and eager to sell,” the banker said.
