Business leaders from the UK metal industry recently gathered to discuss the future outlook, concluding that huge opportunities are within reach. However, grasping them relies on overcoming existential challenges.
The metal industry is a key pillar in the UK’s manufacturing and economic landscape. By underpinning essential areas such as energy and renewables, defence, transportation and construction, it sits at the heart of the country’s security and future growth
However, like many sectors, the metal industry faces its share of challenges, both internal and external. Intense global competition, particularly from countries with lower production costs and different regulatory frameworks, is compounded by soaring energy costs and mounting pressure to decarbonise.
Given the metal industry’s strategic national importance, long-term solutions must be put in place, and sooner rather than later.
The latest Made Masterminds roundtable brought together more than 20 CEOs and Directors from all parts of the UK metal industry to share their perspectives on how these dynamics are playing out.
Held in partnership with Made patron Clarion, the event took place at the UK’s first fully reconfigurable collaborative research facility, the Advanced Manufacturing Research Centre’s Factory 2050 in Sheffield.
One hand tied behind our back
The impact of sharply rising energy costs was stressed by all participants. A stark example is that UK steel companies pay 60% more for electricity than their German competitors, undercutting the nation’s competitive edge.
As one Managing Director pointed out, “Every day, we pay more for our energy than our European competitors, and there seems to be no appetite from the government to help us. Everything we’ve achieved, we’ve had to do ourselves and fought twice as hard as our competitors.
Another Director added, “Companies are having to treat the symptoms because we’ve no control over the root cause.”
However, a participant took a somewhat brighter view, saying that high energy costs forced companies to invest in areas they had ignored for far too long.
While Russia’s invasion of Ukraine in early 2022 led to a dramatic price spike, high energy costs in the UK have long been an issue. A decade ago, Make UK (then EEF) warned that the escalating electricity prices were damaging “investment, margins and competitiveness.”
Five years later, in 2018, UK Steel warned that the price gap between the UK and its direct competitors was eroding the metal industry’s ability to attract international investment.
A CEO issued a dire warning, “Metal production in this country is at risk of disappearing altogether unless we do something about the high cost of energy. Unless the problem is addressed by the government, our industry will always suffer.”
The attendees expressed frustration at the lack of a cohesive, long-term Industrial Strategy that would provide the stability, clarity and certainty businesses need to invest in their processes, people and products.
It was noted that while specific strategies for certain niche areas exist, such as for critical minerals and hydrogen, these plans were disjointed, unconnected and underfunded.
Participants felt more optimistic towards the expansive opportunities in the exploding renewable energy sector.
Net zero relies on metals
The global shift from fossil-based energy production and consumption to sources that produce low or no carbon emissions heralds a boom period for metal producers, fabricators and suppliers.
The production of electric vehicles reportedly requires two to three times more metal than petrol or diesel cars. A wind turbine needs 10 times the amount of metal compared to an industrial gas turbine to produce the same level of megawatts. Every new megawatt of solar power deployed requires 35 to 45 tonnes of steel.
The ‘hydrogen economy’ also promises to provide great opportunity to the metal industry through increased demand for associated infrastructure such as processing plants, distribution pipelines, fuel cells and storage/transportation tanks.
Small modular reactors (SMRs) represent another avenue for growth for metal workers and UK plc. These small-scale nuclear reactors generate about a third of the output of traditional nuclear power stations but have the advantages of being prefabricated, scalable, and significantly more affordable – both in their construction and energy generated.
Rolls-Royce has emerged as a leading player in the development of SMRs with a design intended to be factory-made, transported to the site and assembled. The UK government has also been actively involved in advancing the technology and exploring its potential role in the future energy landscape.
Participants were buoyed by the possibility of a UK-focused SMR supply chain and the growth opportunities it could bring to the UK metal industry. The Rolls-Royce SMR programme, for example, is targeting £250bn of exports with MOUs already in place with Estonia, Turkey, Poland and the Czech Republic.
However, there were concerns over delays by the UK government, particularly surrounding funding. With the likes of the US, Canada, China and South Korea all investing heavily in SMR technology, the UK could miss out on establishing a leading position in this high-growth, high-reward market.
Those present expressed dismay over the government’s decision to select an SMR provider through competition rather than supporting Rolls-Royce. Their concern is that foreign SMR developers, such as GE Hitachi (US/Japan), Nuscale (US) and Westinghouse (US), will benefit from the up to £20bn of funding available, not the UK supply chain.
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Grasping the full scope of decarbonisation
While the move to net zero is metal intensive, the shift also demands that metal businesses transform their own operations. Iron and steel production alone, for example, is responsible for between 7% and 11% of total global CO2 emissions.
Decarbonising the metal industry presents many challenges, not least its energy-intensive processes, particularly in primary production methods like smelting and refining. Scope 3 emissions pose a similarly tricky problem.
The metal industry's carbon footprint extends beyond its direct emissions (Scope 1 and Scope 2) to include indirect emissions from the supply chain, transportation and end-use of products (Scope 3).
Scope 3 emissions typically account for the majority of a manufacturer’s total emissions but are the hardest to track, measure and reduce.
The lack of a common measurement or standard for CO2 emissions was seen as the main barrier to progress by participants. The difficulty in obtaining accurate CO2 data from suppliers, particularly those overseas, was also noted.
One director said, “When it comes to reporting, there has to be a much clearer understanding of exactly what’s needed, by who and when. I’m involved with several advisory groups and they’re all saying different things and using different measures.”
Nevertheless, participants shared numerous examples of how they were decarbonising their operations, from investing in more energy-efficient machinery and processes to using renewable energy sources such as wind and solar. Others use recycled metals as feedstock and traditional blast furnaces are being replaced with electric arc furnaces.
The Advanced Manufacturing Research Centre (AMRC), part of the High Vale Manufacturing Catapult (HVMC) network, was a fitting location for the event. The HVMC recently suggested that the UK can become the ‘green-shoring’ location of choice for manufacturing supply chains, giving the county a significant global competitive advantage.
The growing urgency of shifting to a low-carbon economy means more and more companies are seeking to develop greener supply chains. Increasingly, decisions around where companies establish their supply base will be driven by low-carbon credentials rather than low-cost.
Establishing such credentials will not only preserve and strengthen the global competitiveness of UK manufacturing, it will also safeguard and generate jobs and stimulate business investment.
Doing so, however, relies on creating common standards for carbon emissions reporting, with government agreement on which metrics must be used. Another thing to add to the government’s already long to-do list.
*Header image courtesy of Outokumpu