Economy, Trade, and Rural Affairs Committee

Symudwn ni ymlaen, felly, i eitem 2, sef papurau i'w nodi. Mae yna nifer o bapurau i'w nodi. Oes yna unrhyw faterion yn codi o'r papurau yma o gwbl? Na.

Symudwn ni ymlaen, felly, i eitem 3, sef dyfodol dur yng Nghymru. Mae'r sesiwn hon gyda'r undebau dur yn dilyn ein trafodaethau gyda nhw ar 30 Tachwedd y llynedd. Mae'n mynd ar drywydd y datblygiadau sylweddol ers hynny, ac yn dilyn ymlaen o'n sesiwn gyda Tata Steel ar 7 Chwefror. Gaf i groesawu ein tystion i'r sesiwn yma? Cyn i ni symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record? Efallai y gallaf i ddechrau gyda Peter Hughes.

Sorry, I missed all that. Sorry.

Can I just ask you to introduce yourself?

Oh, sorry. Yes. Peter Hughes, I'm the Welsh secretary for Unite the Union.

I'm Tom Hoyles, I'm the GMB political officer for the Wales and south-west region.

Alasdair McDiarmid, I'm the assistant general secretary of Community union.

Thank you for those introductions. Perhaps I can just kick off this session, and perhaps I can first of all ask Community a question. You've said that

'It is apparent that Tata are no longer considering alternatives'

to their plans, and that you're

'seriously concerned the consultation is a sham.'

Can you set out why you've come to this view, and how this is affecting the consultation process?

Thanks for the question. It is a major concern to us. We've been talking to Tata for a very long time about decarbonisation, since 2020 in fact, and on the whole the conversations we've had with Tata and the dialogue have seemed to be extremely constructive, transparent and meaningful, in our view. But ever since September, when Tata and the Government announced their deal to invest in the 3 million tonne electric arc furnace—a proposal that we believed, and still believe, is completely unacceptable—I think it's fair to say that trust is in very short supply.

We've had a lot of detailed conversations with them and consultations around alternative plans—in particular our multi-union plan—since then. But very recently, some of the comments that have been made by the senior leadership in India, in particular by the chairman, Mr Chandrasekaran, in a Financial Times article, and comments made by Rajesh Nair, the chief executive of Tata Steel UK, and T.V. Narendran, the chief executive officer of Tata Steel, really have put the integrity of the consultation process in doubt, because they've been saying very clearly that they've made their mind up. They're doing this. They're going to push forward with their plans come what may, and they've been pointing to bits of evidence as they see it, in particular an engineering report, which we might come back to talk about, as reasons why they cannot look at any alternatives. For us, that suggests that they are not serious about consulting with us, and suggests that the consultation process is a sham, if they're not going to consider seriously the plans that we're putting forward.

So, that is a major concern, and that is why, certainly, Community took the view—we had a meeting of all our representatives two Fridays ago—that that was unacceptable and our reps decided to give us the mandate to ballot for industrial action. If the process is a sham, then that is where we're going to end up, because Tata's proposals are unacceptable. We believe there are serious alternatives, which we're still talking to Tata about, but if we hit a dead end, then unfortunately that's where we're going to end up.

And this is a question to all of the panel: what are you doing to try to get Tata to deliver the level of engagement you'd like and to change their proposals? Is there any action you'd like the UK and Welsh Governments to take to support you in this?

I think all three unions are at various stages of balloting for industrial action, because obviously that's the strength in the unions. If we don't believe something's going right, then that's our right. The length of time it takes to get an industrial action ballot—we believe that, by the time you get a closed consultation, we need that mandate anyway. But when you say the levels of the UK Government and the Welsh Government, I think the Welsh Government is all about, 'What can we do? What can we deliver for training? How do we deliver for the future of the people, potentially, if there are going to be redundancies, and how do we upskill the people who are already there?' I think that's the Welsh Government's task. But, when you look at the UK Government, I don't believe the £500 million that's already been proposed by the UK Government is enough, and it's come with strings attached. When UK Government gives £500 million to make 2,500 people redundant, we don't believe that is good enough. What we believe is there should be a clear vision for steel in Wales.

And when you say it's not enough, how much should it be, then? How much should the UK Government be providing?

I think that there's a pot of money for green steel, there's a pot of money for green energy. So, when you look at what happens in Germany, France and Holland with the energy price caps—. It's not just funding, but price caps on the energy, which would make Tata more viable in the UK. Why aren't we doing more with that? It's not just about giving more than £500 million. Like you've said, the UK Labour Party have already committed £3 billion, so what would that look like for green steel in the future?

And is that enough?

I don't believe it's enough. Long term, I think we need to develop a steel industry in the UK. We need a sovereign steel industry in the UK. Wales has been at the forefront of the steel industry for a generation. I worked at Shotton steel. I had an apprenticeship there. Shotton steel in the 1980s had the biggest mass redundancy, when 10,000 people were made redundant. It never recovered for 10 or 12 years. We can't let that happen to Port Talbot. We have the people, we have the skills, it's now a free port. There's everything in place there to make that the best steel town, the best steel city, in Europe, if the investment's right. But it's about the investment.

Can I just come in on the engagement part there? I think there are two separate things here, aren't there? There is engagement with the company, and there is engagement with the UK Government on it.

With the company, we're in a consultation process. So, in that process, we've made our views clear, and I'll continue to make our views clear along those lines of exactly what we'd like to expect. I know Alasdair will probably get into some of the detail about our joint union plan on how we want this to move forward, but we've had conversations with them, which has been an ongoing process. It is worrying, as you say, that there have been announcements by Tata about what they're looking to do, when this consultation period hasn't finished. That is a disappointing place to be, because if these consultations are to provide the kinds of answers that we're looking for and it's a proper consultation process, there shouldn't be any derived answers.

There is a separate issue with the UK Government. We have not met with the UK Government on this issue—or, at least, GMB hasn't. We haven't had any consultation with them on it.

And have you tried to have meetings with the UK Government?

Absolutely, yes, we have. We've had conversations about it. In fact, the only time we've met the UK Government to discuss any aspect of this issue is to have a discussion around the transitional board stuff. It was quite clear when we went into that meeting—and I think this is absolutely right, in fairness to the transitional board—that that is a forum to discuss offsetting some of the issues that will be thrown up by green steel, whatever the plan that is created, and not a place to discuss the plans that are in place at the moment with Tata Steel or any proposals. So, we haven't had those conversations. We'd welcome them at any time. I'm sure everyone here would say that. But, as far as we're concerned, there's been no real engagement on that.

Alasdair.

Yes. In terms of what we want from the UK Government, I think I could put a figure on it. Currently, £500 million has been committed for a £1.25 billion plan, which is what Tata and the Government have agreed. We've put forward a highly credible multi-union plan, which is recognised as credible by Tata, by a range of stakeholders. It can be delivered, but it's going to cost an extra £683 million in terms of additional investment. So, a total investment of £1.9 billion. What we believe, and what we've been urging the Government to do is to look at doubling the third-party Government support for a decarbonisation strategy for Port Talbot from £500 million to £1 billion, which, of course, seems a lot of money, but then you look at what other people are doing, and the German example has also been referenced. They had £2 billion from the German Government for ThyssenKrupp, £2 billion from the German Government for Salzgitter. That's what it costs if you want to go green and if you don't want to be reliant on countries like China and India for what is clearly an absolutely essential material for the nation's economic and national security.

Now, as unions, of course, you've expressed different views on the way forward. So, how are you actually working together to secure the best outcomes as far as this is concerned?

Undoubtedly, we have differences of opinion. I think everybody will be aware of those differences of opinion, and it is very regrettable that Unite chose to withdraw from the multi-union plan back in November. Unfortunately, we'll never know what we could have been achieved had we all been pushing in the same direction and campaigning together for a credible alternative plan since November, but we are where we are. And the fact of the matter is this: the unions are absolutely united and of the same view that Tata's proposals are unacceptable and we will fight them; if they do not change them, if they do not listen, if they do not consult meaningfully, then we will challenge them, and we will use all means at our disposal. And we are all progressing along the same route, and preparing for a ballot for industrial education.

Okay. Peter.

We had different visions, and that's been well documented. Ours—. Community and GMB had a vision, and we had a vision of further growth in the steel industry. What I think Alasdair said quite rightly is we're all opposed to the Tata plan to make 2,000 people redundant, to stop virgin steel production in Wales. We're all against those plans. We don't believe their plans are viable. We don't think their plans are long term, and ultimately, we don't believe importing steel from all around the world for the next five, six years to keep the plants in Llanwern, Shotton and Trostre going is a viable alternative. We believe and the other unions—I'm not talking for them, but I am—the other unions believe that blast furnace 4 should remain open until it's end of life and producing steel, and we're all very clear on that. If the company want to take us on on that, every union is prepared to take industrial action to protect our members and jobs in Port Talbot.

Okay. Thank you very much. I'll now bring in Luke Fletcher. Luke.

Diolch, Gadeirydd. [Inaudible.]—at the last evidence session that we had with Tata on this, and some of the comments that were made, especially, as Alasdair says, during the consultation, indicated that they had already made their minds up on a couple things. Just thinking about the current proposal on the table for electric arc furnaces, you guys have been quite clear that the plan itself is an outlier, but Tata dispute that, saying that—actually, I've got a quote here—'All steel makers in Europe are moving towards electric arc furnaces, as this is the only way to decarbonise with current available technology.' I'd be really interested in hearing what you guys have to say about that.

Well, I don't think it will surprise you to hear me say I completely disagree with that. Electric arc furnaces are a big part of the future for a decarbonised steel industry, no doubt about it. But the fact of the matter is there is no other European flat producer that is going all in on an electric arc furnace-only option at this moment in time. No other European flat steel maker is giving up their blast furnaces this decade, and most of them are keeping them into the 2040s as well. And that's very important, because it gives you the flexibility around energy costs, raw materials to use different technologies depending on the circumstances and, of course, it's 30 per cent cheaper to make flat steel through a blast furnace than it is through an electric arc furnace.

So, it's very, very important to recognise that. No-one is doing what Tata are doing—they are an outlier. In fact, in 2040 40 per cent of the European flat steel will still be made by a blast furnace; 40 per cent will be made by electric arc furnace, in combination with direct reduced iron; 12 per cent will be made via a reverberatory smelting furnace; and just 8 per cent will be made through a simple EAF solution. And that is Tata. So, they are an outlier. There is one European company, called Arvedi, that is going down a 3 million tonne electric arc furnace-only option, but they're a commodity player, they're making commodity steels. Tata is not a commodity player—they need metallics to go into their EAF mix. They need about 30 per cent metallics to go into the EAF, alongside with scrap steel, and they don't have it. If they go all in on an EAF, they'll have no blast furnace, they'll have no DRI, they'll have to source that from the open market. There is not a surplus of green DRI in the open market. We think it's a highly, highly risky strategy, notwithstanding the fact that a 3 million tonne EAF is risky in itself, because no-one's doing it. It's much more reliable to have two small electric arc furnaces. So, to say that everyone is doing this, it's the only option, is a complete nonsense. Tata is going it alone, and they're risking everything on EAF, and, for us, that's completely unacceptable.

For me, diversification within the production of steel is key, isn't it? I know that Tom wants to come in, but if I can stick with Alasdair for a second, Community have said that the size of the electric arc furnace—and you referenced it there—is the root of your opposition to Tata's proposals. Can you just elaborate a little bit more on why that impacts keeping the blast furnaces open?

Yes, I certainly can. We oppose the 3 million tonne EAF, along with the GMB—Unite take a different view. But it is the problem. Because a 3 million tonne electric arc furnace means the end. It means the end of blast furnace steel making, because it is impossible to run a blast furnace beyond the point of the electric arc furnace coming into operation. Because you have 2 million tonnes of iron coming out of blast furnace No. 4, you have 2.7 million tonnes of liquid iron coming out of the 3 million tonne EAF, and you only have a 3 million tonne hot strip mill. So, it's inconceivable that blast furnace No. 4 would continue to run alongside the 3 million tonne EAF. So, that's a massive problem.

Another massive problem is that it permanently will cut our capacity in Port Talbot. As I say, the bottleneck in Port Talbot is the 3.2 million hot strip mill. But if you have the—. Sorry, I've lost my train of thought. It will permanently cut the capacity, because you'll be left with 2.7 million tonnes of steel, which can make 2.5 million tonnes of hot rolled coil. And that is a major issue for the future, because it means there'll be less steel to go around, less steel for the downstream, less steel for Trostre, Llanwern, and will put jobs at risk elsewhere. So, it's a permanent cut of capacity, it means the end of blast furnace steel making, and it means the end of any notion of a just transition because you cannot keep the blast furnace going until 2032, and you cannot leave the options open for the other technology solutions that we want to look at as part of our plan, in particular a REF smelting furnace of the sort that is being proposed to be introduced in Holland.

Just to come back to the stuff about, 'This is the inevitable end of the European steel market, it's got to be blast furnace steel', well, it won't be, there's still the demand for virgin steel. And what you're seeing here is the offshoring of that to its sister company, Tata Steel in India, where they're building new blast furnaces, and they will be produced in, sometimes, methods that do not have the same environmental standards as they do in the United Kingdom. Meanwhile, here, you will just have this arm of it. So, it's not an inevitability, it is not something that has to happen, and it's not something happening throughout Europe, it is just a choice of Tata to do it.

Coming back slightly on what Alasdair said, I think there is a clear vision that, if you want to grow something, you have to invest. We're going to be building the biggest windfarm in the Irish sea, just off—. And everything's going to be floated out from Port Talbot. So, the vision should be, why aren't we going to build a plate mill on the end of it? And therefore we can actually make those wind turbines, rather than importing them to that place from western Europe, or even further from Asia. Sorry, Paul, when you asked about the question before, if the investment was right, the investment would be for a plate mill, and therefore, when you're looking at the 3 million tonne electric arc and the blast furnace, you could run them both together, as long as you had the plate mill. And that's the investment, where you can actually make everything that's going out into the Irish sea in Port Talbot, built in Port Talbot, produced in Port Talbot, and manufacturing sites, and then you've got the energy to do it as well. So, the long-term future is practical if the investment is right.

And the last thing I disagree with Rajesh on is that—and Tom touched on it—if they're building blast furnaces, which they are in India, all we're doing is passing the green footprint from Wales to India and then to import the steel back into Wales. We're not actually doing anything for the climate, we're not doing anything else—all we're doing is passing the carbon cost to India, where labour costs and everything else are a lot cheaper. It's a flawed vision.

On that point of emissions, whilst the EAF is being constructed, Tata has said that they'll be importing semi-finished steel, and their argument is that that will have less of an environmental impact than what they're currently doing, importing the raw materials for steel. I can already see Peter disagreeing with that, so I'll come straight to Peter.

I think all you're doing is passing the buck. You've got to make the steel somewhere, so that, actually, if you're making it in India, or you're making it in Vietnam, or you're making it in IJmuiden, and then you've got the transport costs of bringing it into the UK, the shipping costs to bring it into the UK, obviously you're just passing the buck. It's a total illogical thing that they're saying. All they're doing is trying to make it a lot easier.

I'd go further than that, actually. It is categorically not true. Our experts, Syndex, the experts jointly appointed by all the trade unions, have demonstrated, in the consultation process, that through the transition, Tata's model will be significantly less green than our model, and that is a fact. We can demonstrate it, we could probably demonstrate it publicly in the fullness of time, and Tata have conceded, in the conversations we've had with them, that their model would be less green over the transition period. So, that is not true, and I hope that the record can be corrected on that point.

And we're all on the same page on that. Their plan is flawed, and when they're actually saying, 'It's going to be greener', I'd go as far as to say that that is really very questionable.

Just one final question from me, Chair.

Yes. Very quickly, yes.

And I'm conscious this might be fairly sensitive, so I can understand if you guys are unable to answer it, but there have been some conversations around potential health and safety concerns in, I believe, blast furnace No. 5, and that potentially leading to an early closure. Is that something that you guys are aware of or have heard anything about? Again, as I said, I understand it might be quite a sensitive issue, and I'd understand if you can't answer, but I just wanted some clarity on that.

I'm happy to—

So, there are major operational difficulties in the heavy end, I think it's fair to say. We'd agree with that, our members would agree with that, our members who work in these areas would agree with that. The situation is particularly acute around the coke ovens, and the future of blast furnace No. 5 is linked to the coke ovens. If you don't have the coke ovens, you don't have enough coke to go around to support blast furnace No. 5. It is a concern that we recognise. The situation is not improving. It's being kept under review, and I think it's fair to say the unions and the company as well, in all fairness to them, are completely united behind the view that there is nothing more important than the health and safety of the people that work there, and, ultimately, if difficult decisions have to be made to keep people safe, then that's what will have to happen. But that is not where we are. The current plans remain in place, which are to keep the coke ovens operational and blast furnace No. 5 operational, up until the end of June, at least. That's the company's plan, which we haven't accepted, but that plan hasn't changed at this time, but it is being kept closely watched and under review, and there is an ongoing dialogue between the trade unions and the company on this.

I think, ultimately, we have to put our members and employees first; health and safety is paramount to everyone. But I think I'll go one step further: it's been the lack of investment, over the last 15 years, in the coke ovens that has led it to deteriorate to the situation it is. I think that's the key driver in all this, the lack of investment in the coke ovens. I think it would've been be a different argument if you'd invested in it, but, ultimately, our members' health and safety is paramount, but it's Tata's responsibility as well.

Are there any conversations about potential compensation for workers if there was an early closure as a result of—?

We're still in the middle of consultation at the moment, and we don't particularly want to talk about compensation packages and stuff like that. I don't think it's the right place, I don't think it's the right time. Obviously, we're halfway through consultation, and what we will do is we will fight, and all the unions will fight, for every single job that's there at Port Talbot. Rest assured, that is our paramount—. All we want to do is to protect jobs, protect as many people as we can, bearing in mind it's not just the direct Tata employees; it's the four people for every one employee at Tata we're fighting for as well.

Fair enough.

Diolch, Luke. I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning to the panel. I've got some questions firstly around the deliverability of Tata’s proposals. So, they said that they intend for their EAF to be operating by 2027. We know they’ve got a commitment from the National Grid to provide the grid connection in sufficient time, but can I ask: what are the other potential regulatory barriers Tata is likely to face in getting its new furnace operating to this timescale?

Alasdair.

Well, that is a big one, the grid. There's no doubt about it. Another big issue is the timeline in general. I think anyone around the industry will tell you that to get the EAF in place by 2027 is a big ask. There are still issues with planning to resolve. That can take a long time, and you never quite know how that's going to pan out.

And I think a major policy issue to be resolved, really, is what's going to happen to secure a supply chain for scrap steel between now and then, because that is just not in place. A lot is made of this idea that we're the biggest exporter of scrap in the world, or second biggest—11 million tons we have, and 8 million tons goes abroad—but there's nothing to say that just because Tata’s going to build an EAF there's going to be this surplus of scrap that is redirected from Turkey and elsewhere being diverted into the UK. It's not just quantity; it's quality as well. It's a very small proportion of scrap that can actually be used to make the high-quality steels that we currently make in Port Talbot. So, we need a framework to develop and secure that supply chain for a future decarbonised UK steel industry, and that is going to require policy support, legislation probably, export controls in some way. None of that is secure, so, again, to go all in on an EAF when you don't have the supply chain for your most critical raw material is a massive, massive concern, and 2027 is not far away.

I think—. Sorry, Vikki, Chair. I think Alasdair touched on it, and they've actually said in consultations they haven't actually submitted a planning application yet for this electric arc furnace, and 2027 to build an electric arc furnace is very, very optimistic. I would go even further to say: will it be producing steel before 2029? That's the genuine concern with all this, because we know projects in the UK tend to slip. We've seen that at Hinkley Point, which should have been producing electric already, but it's not. So, I think our big concern in all this is: how are they going to get the planning permission through? How are they going to get the infrastructure in place? The National Grid are saying there will be power by that time, but what guarantees have we got that there will be power by that time? And I think the biggest key in all this is: why then, with the potential delay that the company are going to face without planning permission, why are they insisting on closing the blast furnaces by the end of the year? It does not make sense whatsoever. And when they say they're going to put planning permission in after the blast furnaces are closed, that make you wonder.

Okay. Just to move on then, so, we know that T.V. Narendran of Tata has said that, based on developments in the US, he expects to be able to address the challenge of making the highest quality steels using the EAF over the next few years. Some of the panel have touched on this already, but if I could ask for any further comments about how likely you think it is that this will happen, and perhaps, very importantly, what could be the implications for Tata's downstream sites if it doesn't?

It's a very good question, and it's been asked a lot recently: what can you do in an EAF, and what can't you do? And, undoubtedly, the technology is changing and developing all the time, and maybe in a few years' time we will be able to make all or nearly all of the steels that we currently make in a blast furnace through an EAF. But we don't know, and there's no way we're going to gamble our members' jobs on a 'maybe, possibly, one-time-in-the-future', because we do get that a lot from Tata at the moment. The fact of the matter is that, at the moment, you cannot make 10 per cent of the order book through an electric arc furnace. That's 30 per cent off Trostre's order book, and it's 25 per cent off Llanwern's, and they're some of the most profitable products that Tata makes. The rest of it—the 90 per cent—you can't just make it through an EAF; it depends on the metallics, the mix that you have. You need to have metallics in the mix, and, if you don't have metallics—30 per cent metallics, probably, for most products, that being pig iron and hot briquetted iron—if you don't have any of that, then you can't make 60 per cent of the order book. So, the fact, again, that Tata wants to go all in on an EAF, without having any captive supply of metallics, is a major, major problem.

And, yes, throughout the transition period, and perhaps beyond, they're going to import coil and slab from elsewhere to feed some of the downstream, but, long term, that is not a sustainable option. We need a UK supply chain—end-to-end supply chain—for our business to be sustainable. And if we don't have that, then, ultimately, all of our downstream plants are at risk.

Just to add to that, I think one of the other things that's worth mentioning is that: Alasdair's right, why take the gamble? It's a big question for a company like this: if you hope technology gets there, wouldn't you have a back-up card and keep one of the blast furnaces open, so that, if you weren't able to get there, you'd get to a point where you'd say, 'Well, if that's not the case, we can convert this to gas or hydrogen', or whatever we get to on that state, and you can still continue to meet the order book?

But the other part of this is that they are developing a DRI project in the Netherlands, looking to how they can bring green hydrogen online there to produce steel. So, it's very, very simple. If they believe that stuff, I don't understand why they would do that in the Netherlands. I appreciate there's a bung from the Dutch Government to do that, but, if they believe all those things are there, why have those options? Again, if it's inevitable that we're all going green, why are they doing something different over there and doing something completely different in their Indian arm?

I just think I'll touch on what Tom said, and it came up in the select committee. I think T.V. Narendran said, 'Oh, we won't be able to get gas if we build a DRI', and I think it was Stephen Kinnock who said, 'Well, yes, there's a big gas line running from Milford Haven right past Port Talbot, so of course you can get gas in there.' So, it's a debate that—. They need to look at what they're going to be doing, potentially, in the future. DRI is the—. They're actually building—. Like Tom said, in Holland, they're already building one. So, why aren't we doing things like that in Wales? We've got the infrastructure. I think Alasdair's going to come back on something slightly different, but the long-term future would be to commit to invest in Port Talbot. I think it's the lack of investment that we're worried about.

I'd just like to come back on this DRI issue, because it really isn't the kind of panacea that sometimes it's made out to be. And I'd caution anyone from celebrating Tata saying that, one day, maybe, sometime in the future, they'll look at investing in a DRI if the circumstances allow and if they get funding to do it. Because the fact of the matter is, currently, there is a very, very weak business case for doing it. Peter mentioned gas, but there are a couple of other reasons as well. And the biggest reason of them all is the fact that, currently, we're looking at something like 5 per cent HBI to go into the electric arc furnace mix, which is in the region of 120,000 tonnes a year. There is no way Tata are going to invest in a DRI plant for 120,000 tonnes. Yes, there's a case for having a shared facility in the UK for all UK steel producers to use, but that's not where we are at the moment. There's a very, very limited and weak case for investing in DRI just for Port Talbot. Tata aren't going to do it, and that's the truth of it.

And the other issue that is a massive barrier to DRI is the fact that you need a very specific form of iron ore. In fact, only 3 per cent of the world's iron ore reserves are suitable for DRI steel production. So, the companies that have a captive supply of this DRI grade ore are going down this route, and other companies, like Tata, like ThyssenKrupp and so on, it's much, much harder for them to do it, because you're going to be competing on the open market for a very, very scarce resource. And that's why we believe—. Along with, actually, and this is important—. A DRI plant will only employ 200 or 300 people. Two hundred or 300 people—that is no substitute for the 2,000 and more jobs that are going to be lost under Tata's current proposals.

So, the focus should be less on DRI at the moment, we believe, and more about extending the transition by investing in a small electric arc furnace now, alongside keeping blast furnace No. 4 going up to 2032, and, in 2032, looking at the best technology option to replace blast furnace No. 4. We believe, most likely, that's likely to be a REF smelting furnace, which is the route that Tata Steel in the Netherlands are going down, which means that we will be able to use blast furnace grade pellets, and we will be able to plug that facility into our existing infrastructure.

But that's the point, isn't it? It is that we don't know. We still don't know with so many aspects of this, which is why it's crazy to shut it, because you just don't have any options; you reduce the amount of options you have. If a lot of these things don't work, if there's a captive supply of those pellets, what you actually need to have is as many options on the table to produce—

Yes, don't close doors now.

Yes, absolutely.

I think that's the key in everything we're saying: don't rush a decision now.

Okay, thank you. Moving on to the unions' alternative proposals, I'm conscious of time—I know my colleagues have got other questions as well—but could you outline for us essentially why your preferred approach as unions would deliver better outcomes both for workers and for the company than Tata's proposals?

Yes. I'll kick us off with that. I've already talked about it a bit, but we've been working on this for a very long time. Back in 2020, all the unions agreed our red lines that would need to be adhered to for a just transition. We want to secure the future of steel making in Port Talbot. We want to maintain our capacity and protect all of our downstream plants, and there must be no compulsory redundancies. We've been working with our experts for a long, long time to develop proposals that deliver on those red lines.

So, our multi-union proposal, which is published for all to see, highly credible—Tata rejected it, ultimately on the basis of cost, but everyone knows it can be delivered. All of the figures in the report have been agreed with Tata; it's a matter of cost. And what we're trying to do in our proposal is to deliver a just transition and to secure the best possible future for steel making in south Wales and across the UK. We want to do that by transitioning in stages. As I've said before, we believe we need a small electric arc furnace in the first instance to run alongside the blast furnace, because it's not going to happen, the blast furnace will close, if we have a 3 million tonne EAF. We'd run with a small electric arc furnace and blast furnace No. 4 up to 2032, and then in 2032 we'd replace that blast furnace either with an EAF, potentially linked to DRI at the time, or preferably a REF smelting furnace, should the technology develop as we hope that it's going to do. That will protect an additional 2,300 jobs right up to that point. Those are the jobs that would be lost as part of the decarbonisation proposals. Of course, we want to talk about other investments. Peter mentioned before a plate mill. We know we need a plate mill in the UK. And there are other opportunities to invest in the downstream and to protect more jobs by doing that. So, it's a better option for the workforce, no doubt about it. It's a better option for the communities as well. And we believe it's a better option, ultimately, for the country and for the economy as well. Yes, it does require more investment, but the levels of investment that are required are not hugely significant compared to what we're seeing in France and Germany and Spain, as elsewhere. We just need the political will—and of course we need the commitment of the company as well—to achieve that.

A lot has been talked about by the company recently about losses, and having to absorb losses throughout the transition. Again, this is an absolute red herring from where we are. There aren't substantial losses through the transition period. Yes, there is an additional £683 million of investment, which of course we'd want the Government to support, but, under our multi-union plan, throughout the transition, that being the years up to the electric arc furnace, the losses are minimal and we believe that, working with our experts, we can get that down to something close to zero. What Tata are really talking about when they're talking about losses during the transition period and Government not being prepared to support that—which, of course, they wouldn't support that—is lost opportunity. The lost opportunity is this. Tata want to bank nearly £200 million of carbon credits, banking them by shutting the blast furnaces, by shutting the coke ovens, and they want to make well over £400 million, get a huge pay day, by importing lots of dirty steel from India and elsewhere to feed the downstream before the carbon border adjustment mechanism comes in in 2027 and makes it uneconomic. They want that big pay day, and that's what they're scared about missing out on. It's not losses. Our multi-union plan doesn't include lots of losses. Yes, it requires investment for the future, but it's a complete misrepresentation of the facts, what Tata have been saying around losses over the transition.

I'm very conscious of time, so can you please be as succinct as possible, please? Thank you.

You're asking three trade unionists to be succinct. [Laughter.]

I know it's very difficult.

I'll be very succinct. I think the vision is for growth. I think the steel industry is going to grow, and I think we've got to be part of that. I talked about the plate mill; there are other options for Port Talbot. And I think the vision of what the Tata plans are is very short-sighted. We should be increasing production. We should be making sure that we have a long-term future. And I want to say this again: what they're actually doing by moving all their green costs to India or to IJmuiden and moving all the jobs from the UK is criminal.

Thank you, Chair. Thank you, panel.

Thank you, Vikki. I'll now bring in Buffy Williams.

Thank you, Chair. Thank you for joining us this morning. Tata has said that an independent engineering report it commissioned concluded that operating a blast furnace while building the new EAF is not feasible, that it would create a sub-optimal plant layout that would significantly increase costs. How would you respond to this assessment?

I'm very glad you asked this question because, again, I think this is a massive misrepresentation and needs to be taken on. Yes, there is an engineering report, which our experts have had access to and have reviewed in full. It refers only to the 3 million-tonne EAF option, it doesn't refer to the smaller electric arc furnace option. It doesn't say it's impossible to keep the blast furnace running while the electric arc furnace is built, it says it will be costly. It will cost upwards of a couple of hundred million pounds to make that investment. And that's true, and it would lead to, perhaps, a less optimal layout than the company would like, but it can be done. But we would admit that the business case, again, for making that huge investment just to keep the blast furnace going for another couple of years—because you're going to have to close it anyway when the 3 million-tonne furnace is operational—is very weak.

However, previous engineering reports have said that it is absolutely feasible and much easier to invest in the smaller electric arc furnace and integrate that with the steel plant while keeping the blast furnace going. Yes, it's a very significant cost again, around the £200 million mark, but that is already factored into our multi-union plan. That is part of the £683 million investment cost. And the difference is that you're not just getting an extra couple of years out of the blast furnace, you're getting another seven years, because it's going right up to 2032. So, you're making an investment, not for a two-year life extension of the furnace but for seven years, with the purpose of keeping open the options for a much better future to secure the future of steel making in Port Talbot. So, it's a complete misrepresentation. It can be done, and the argument for making that investment under the multi-union plan is strong and is factored in.

I think what they're trying to do is to use a lot of excuses to come up with their plans. I think that's the driver in this. The driver is that they're using things that—. We believe that they could build the electric arc and move it slightly, but they're trying to do everything on the cheap, and, basically, saying, 'We want to close this, so we'll come up with a plan that makes us close this.' That's our assessment of it. I want to be short and succinct.

Can you give us some examples of steel companies that are keeping blast furnaces open as part of their transition to using electric arc furnaces at the same site?

IJmuiden is one. Tata is going to be one in IJmuiden, and that's the only one. And that's the same company.

That is the best example. Tata Steel in the Netherlands have just relined their blast furnace No. 6, and it is now scheduled to run up to 2045 as part of their managed and phased transition. So, you don't have to look very far for examples. And as I said, there are no European flat producers who are giving up their furnaces this decade, and most of them are keeping them into the 2040s as well. So, again, Tata Steel UK is an outlier in wanting to shut down the heavy end at this particular point.

Short and sweet.

Thank you. Thank you, Chair.

Thank you, Buffy. I'll now bring in Samuel Kurtz.

Diolch, Cadeirydd. This is going to be very short and sharp from me, because much of what I was going to ask has already been answered. So, thank you for that. But when Tata were in front of this committee, we asked if they'd be prepared to delay the implementation of their plan until after the upcoming UK general election. I was just wondering if you would support such a move. We'll start with Peter, then Tom, then Alasdair.

Of course. We want to get a UK Government in that is actually going to invest, and I think that's the key in all this. I think any rash decision that the company makes now is irreversible. If they close the blast furnace down, they cannot just go and switch it back on. So, we want that decision to be delayed until 2025. Short and sweet.

If you're going into a bargaining position as a company, you're going to have to have a position. So, I don't think you would say, 'We've put plans together' and then you want to make wholesale changes. That being said, we don't think that that should be Tata's position if it is, but I'll let Alasdair come in, I think he's got more on this.

I would like Tata to wait until the general election. Obviously, Labour have put out a hugely ambitious platform around the £3 billion fund. However, I don't believe that Tata are going to do that, because the losses are very, very significant and we cannot let the Conservative Government off the hook. They still need to engage; they need to do things differently. They need to reassess the £500 million support package, and we need to keep the pressure on on this Government. And to point to the future Labour Government and ask Tata to delay, I fear that that let's them off the hook.

Thank you, panel. Thank you, Chair.

I'm afraid time has beaten us. Our session has therefore come to an end. Thank you very much for being with us this morning. Your evidence will be very important for us, as a committee, in scrutinising this matter going forward. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know. But, once again, thank you very much. We'll now take a short break to prepare for the next session.

Croeso nôl i gyfarfod Pwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr at eitem 4, sef dyfodol dur yng Nghymru. Yn y sesiwn hon, ŷn ni'n siarad â phanel arbenigol am faterion sy'n ymwneud â dyfodol dur yng Nghymru, gan gynnwys canolbwyntio ar ddatgarboneiddio a'r effeithiau ar y gweithlu a'r economi leol. Gaf fi felly groesawu'r tystion i’r sesiwn yma, a chyn ein bod ni'n symud yn syth i gwestiynau, a gaf fi ofyn iddyn nhw gyflwyno eu hunain ar gyfer y record? Efallai y gallaf i ddechrau gyda Dave Worsley.

Bore da, bawb. I'm Professor Dave Worsley from Swansea University. I've worked within the steel industry now for 32 years—can it be that long? Yes, it can. [Laughter.] And my passions are about how we can get the steel industry to net zero and expand steel use in things like construction and use it as the fundamental pillar of a net-zero green economy.

Clare Richardson-Barlow. I'm a lecturer at the University of Leeds. I focus on industrial decarbonisation and just transitions. I've worked on decarbonising the UK steel industry for the past five years.

Bore da, good morning. I'm Ben Burggraaf. I'm the chief executive of Net Zero Industry Wales. I've worked in the steel industry myself for 12 years in my early career, and Welsh Water. I'm now running Net Zero Industry Wales, and that's an organisation that's been set up with Welsh Government support to deliver the south Wales industrial cluster plan and also work with other clusters in Wales to do the same.

Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a few questions. Does the approach proposed by Tata Steel sufficiently balance environmental and carbon reduction goals with the wider social and economic impacts on workers and communities in your view? Who'd like to start on that?

I'll start. I definitely think the focus is on environmental goals. Of course, justification behind the decision is based also on economic questions around Tata, not necessarily around the communities that are being affected. I think that there are definitely improvements that could happen on the equitability and the social issues related to any transition, particularly given what we've seen play out over the past couple of months.

I think the plan as presented at the moment represents the best of what could be possibly thought about with the amount of funding that's available from central Government. If I compare the investment strategies of the UK Government with those of our European partners, they're not on the same page. They're within the same order of magnitude, but, for example, the Dunkirk Arcelor works are getting about €900 million for a decarbonisation plan, and the TKIS plant in Germany is getting €2 billion, plus a local hydrogen plant that is being built by the local government. So, I think what we all should try to endeavour to do is to increase the ambition level by supporting a much more ambitious investment plan in both the works and the surrounding community, because, ultimately, steel is that pillar that holds up the whole of the green economy.

What I want to add to this is, I think, for me, being part of the whole decarbonisation plan for south Wales, but also wider Wales, I think it's important to note that, actually, this announcement is more driven by the economic reality of the plant than actually by decarbonisation, because the net reduction to global emissions is likely to be zero, if not actually get worse. So, actually, I find it a bit of a misnomer that what we're actually talking about is in the context of decarbonisation, because this announcement is driven by economic reality. It was very clear from some of the other evidence sessions in this committee, from the Tata executives as well, that loss making is part of this and drives some of the pace of the transition that they're getting into.

This is very important, because I think a lot of the narrative around the decarbonisation agenda is about job losses at the moment, and I think there's a historical trend of that, but it is important to say that this is not driven by decarbonisation; this is driven by an economic reality. And we can't connect those two because that would be incredibly detrimental to the longer term decarbonisation agenda in Wales. Because if we start to say to people that decarbonisation inevitably leads to job losses, then that will scare off some significant investment as well, and there is a big programme lined up for the south Wales industrial cluster—£30 billion. We want to make that as receptive as possible for the investment to come in—not for the communities to start saying, 'Do you know what, we don't want decarbonisation; we don't want the drive for net zero, because it will lead to job losses.' There is a counterfactual here. So, I think it's really important to disconnect those two from each other in this argument and debate.

Perhaps I can direct this question at Professor Worsley: the Minister for Economy has quoted you as saying that at least three additional jobs are reliant on every direct job in the steelworks, and, on some counts, potentially up to five. What impacts are the job losses likely to have on the wider community, and how many jobs within the local area will be potentially affected?

I think this came out because in the KPMG report they're using some data from 2012, which effectively is probably 2010 census data. In a more recent study that our colleagues in Cardiff University are doing—which I think has yet to be published, but I've spoken to the authors—it's 3.2 in the steel supply chain, and the figure of five is more about how the wider community is affected. If you imagine these steel jobs, it's not cucumber stacking in Sainsbury's; they're high-value jobs with high salaries, and the more you take those jobs out of a community, the more of a shock wave there is around the other support structures, all the way down to bakers, shops and butchers and all the rest of it.

I think the situation that we find ourselves in here, with as many job losses all at once, is that we are in what is known as uncharted territory. Similarly, technically, if the steel plant in Port Talbot can't provide the downstream operations, particularly Llanwern and Trostre, with the appropriate grades, either during the transition or after the transition, that risks those steel jobs in those other places. I think the only secure element here is probably the steel that goes into construction and, therefore, the Shotton works in many respects, because most of the value that's added to that product comes in the form of coatings and the steel sensitivity to contamination is not as great as for automotive and packaging. So, that's where those numbers come from.

I think the wider impact is that, of course, universities like ours and training colleges and things are ultimately interwoven with the economy of the region, driving innovation, driving decarbonisation, driving the opportunity for net zero, and an impact like this, combined with our exit from the European Union, I have to say, and the lack of funding that's available for innovation, could be terrible.

Ben Burggraaf, you've said that maintaining or accelerating the implementation of the south Wales industrial cluster plan will enable the economic impact of the Tata Steel announcement to be mitigated in the medium to long term, as well as shorten the period that the impact has in the short term. Can you explain how this could be achieved?

Yes, of course. Thank you for the question, Chair. I think the whole thing arranges around the south Wales industrial cluster, and it's a fact that there has been industrial decline ever since the 1990s. What that plan outlines is another way of achieving a green industrial revolution again, powered, ultimately, by the floating potential up in the Celtic sea, and also playing an integral part in that supply chain. But what is really important is that that hinges on some early kind of revenue support from the UK Government in order to deploy carbon capture and storage technology, and then going into hydrogen. Those two technologies are incredibly important also when we talk about the subsequent investment Tata might make in a DRI plant going forward, or, actually, in decarbonising a blast furnace operation directly, if that's the case.

But what is really important is that, currently, those projects will go on hold this year, because there is no revenue support guarantee for the south Wales cluster, because there are four clusters that are directly linked with the pipeline up in the east of England, as well as Scotland, as well as in the north-west of England. They will have the first clusters to be decarbonising and have access to that infrastructure. We will go on hold from this year onwards because we don't have that revenue support guarantee. That will delay the £8 billion plus of investment that's associated with the first deployment of projects in south Wales. That delay could eventually mean—because we're in a global competitive market with regard to also competing for investment—that that either could be delayed, in the best case, but could also be completely removed, because there are other places in the world that can do this, clearly.

So, there is a bit of an urgency here about deploying technologies like CCS, and there's a really credible solution being developed as part of the plans that are being developed. They're heavily funded, and there's over £100 million been invested to date—50 per cent by Innovate UK, from Department for Energy Security and Net Zero funding, another 50 per cent from private companies, like RWE, Shell, Tata, and all the others who were part of this kind of discussion in developing this plan. And what I'm missing in the context of the Tata discussion is that this is a much more regional challenge, and also regional opportunity, and we should look at Tata as part of that regional opportunity going forward and what role it plays. But it all hinges on that revenue support, but also on Ofgem giving permission for hydrogen pipeline investment to be recuperated through gas bills. But there are some key decisions that can be made now to unlock quite a significant amount of investment, multiple times what Tata, now, are willing to put in the Port Talbot plan alone.

Thank you for that. One final question from me for all the panel: what should be the priorities of the transition board established by the UK Government, and to what extent are these covered in its terms of reference? Who'd like to go first on that? Professor Worsley.

Firstly, I think the terms of reference are a little confusing. But if I go to what they should be doing, my opinion—and that of my colleagues from the support structures for the steel industry—is that we need to be pushing for a greater investment level, and that's not just in the hardware for transitioning, but also, in particular, for the people of the region and those affected.

And when you say greater investment, what sort of figures are you thinking of?

Well, at least double what it is now, the capital investment, I would say. That aligns, probably, with the figures that some of the union folk have come up with. But the transition plans of similar steelworks in other parts of the world, like Canada, where they're working on the same idea, has been of the order of $3 billion—so £2 billion—and almost all governments are looking at a sort of 48 per cent intervention. If you look at the Port Talbot plant at the moment, it's £1.2 billion versus £500 million Government investment. They're not aligned to global conditions.

The people element is really important, and if I think about our own community, one of the other things that happened when we Brexited is £225 million was returned to Treasury from the European Union for research on coal and steel. That money has vanished into the ether, and it should be released to create an innovation fund that colleagues such as Net Zero Industry Wales could use not only to benefit steel, but to benefit the wider opportunities that draw steel into the marketplace.

Anyone else on this?

For me there are three elements to this. First, I think the money should be used partially to help derisk the delivery of some of the south Wales industrial cluster plan, because I think that gives a longer term perspective on how we can decarbonise industry and create the infrastructure needed. Because when you build the infrastructure, they will come. There's very clear evidence already from the track 1 clusters—the one in HyNet and the east coast—that it's already attracting interest from abroad, and investment. So, that's one thing.

The second part I think is important—. I used to work a lot with colleagues from Tata Steel, and they have an enormous amount of skills that have been built up through experience, on-the-job training, with a lot of internal training courses, because it is bespoke for the industry. What I would love to see the work do is actually transfer those kinds of skills into qualifications that are recognised outside of the steelworks, because they’re incredibly skilled people, but they’re not generally put into a form that is externally recognised. So, a skills passport, or doing something with that—. I know there are some initiatives already ongoing in the UK recognising on-the-job training, and I do think I would love to do that as part of a much bigger skills initiative.

And last but not least—Dave was already mentioning it earlier—I do think it’s important that we also drive some of the innovation, particularly supporting the supply chain that has been supporting the steel industry in that area for decades, with specific products and services, maintenance or providing them with specific services—it could even be from a catering perspective. All across that there will be that multiplier effect that was talked about earlier. Give them a future view of what a green economy in the area, in the region, could be, and they’ll use that innovation fund to help them build a proper transition plan, but also maybe support them with some capital expenditure in order to physically buy the equipment, upskill the people to actually transition them into a direction that allows them to benefit from floating offshore wind, the decarbonisation of wider industry, sustainable aviation fuel production—I can name many things. But I think we need to help and support, because a lot of them are currently in reactive mode. They have been in reactive mode for decades, and they need some help and support to pull them out and help them to pivot their business in a direction that gives them a longer term prospect, and that will also give them access to provide a business for future generations.

I think of this in terms of three broad categories: there's the economic, and my colleagues have touched upon the higher levels of investment that are needed across a variety of different areas; there's the people, the retraining, the reskilling, the transfer of skills; and then there's the policy side, and that's where I think things like electricity pricing need to be a priority, and the transition board. The leadership that's there is in a very good position to advocate for those sorts of changes. So, it's the economic, the people and the policy side.

Thank you very much. I'll now bring in Vikki Howells.

Thanks, Chair, and good morning to our panel. If I could ask this question to Dr Richardson-Barlow first, and then to our other witnesses: do you think that the Tata proposals adopt a sufficiently diverse range of methods for steel industry decarbonisation, and if not, what other approaches could be taken?

First I should say that I think Tata's focus on EAF is a significant step, but incorporating a range of technologies over the medium and long term is necessary. There's no one single way to decarbonise, as you know, so what I refer to as an 'all of the above' approach is really what we should be focusing on for industrial change across a variety of sectors. Here in the case of steel that means EAF in the short term, then incorporating carbon capture, utilisation and storage, hydrogen and DRI in the medium and long term, depending on how the situation here shapes up. So, the answer is 'yes and no', essentially.

I think I would concur with that. The underpinning problem is that, obviously, if you have £500 million—I keep coming back to this, sorry, Chair—if you have that as your Government support structure, that limits the ambition level to what you can do. I would see there's huge opportunity at that works to work with the industrial cluster partners on how to use hydrogen, not only for DRI, but for wider furnace use. But it has to be, ultimately, if we can, green hydrogen, because the other thing that we're talking about is decarbonisation. As Ben rightly points out, just stopping carbon emissions in Port Talbot by using more scrap that might normally go somewhere else to be used doesn't necessarily solve your global carbon emission, you're just moving it. You're reducing our emissions to increase emissions, say, in Turkey, or somewhere like that, where the scrap currently goes.

I think it's a good start. I think what I'm more excited about is that at least we have a steel company of size and reputation prepared to put its funding into an economy like ours. We need to now match our aspirations and our investments and align to produce something that has benefit to all and underpins our transition to net zero.

Can I just come in too? I want to go back to the point I made earlier, that this is not actually mainly driven by decarboniastion; it's driven by economic reality. I know for a fact that Tata has explored all the different options as part of the SWIC deployment project, because they've been part of that. Actually, the inaccessibility for the south Wales industrial cluster to tap into the carbon dioxide business model support, the inability to actually do that, also to build large hydrogen plants—could be initially blue, but then going into green in the future—that's not there yet. So, you can almost understand that the first step to take is to go down an EAF route, because that's where the whole world is going towards, so that is the natural first step to take. But it is the start of a journey, not the end of a journey. It brings Tata Steel to the base camp of climbing mount Everest, because getting to net zero is like climbing Everest. We need to really see this in the context of a journey, and the EAF is an obvious first step of that. You could argue whether the choice, the size is right, but moving to an EAF allows them to use more scrap. If you use more scrap, your emissions go down, which is a really good thing to do. But I think it is wrong to think that not all the other options have been investigated. The fact is that they're not available to them now to have a sustainable business model for them to keep on operating in Port Talbot. I think that is an economic reality piece rather than being directed by only having explored a limited amount of options, because that is not completely true.

Thank you, really interesting answers there. If I could ask, secondly, we know that the trade unions have told us that Tata's proposals to invest in a single electric arc furnace, without either keeping a blast furnace or investing in a DRI plant that provides access to metallics, would make it an outlier in Europe, but Tata disputes this. So, could I ask the panel what their views are on this issue?

Clearly, the answer to that is, 'Yes, it's an outlier.' There is one other organisation that's going down a similar route, but its product mix is very much different. It's more making reinforcement bars and structural steels that don't require the high control of metallic quality that you need to make thin-sheet steels. My biggest concern here is how we can all work together to control the scrap supply chain, because the reality in the UK is that we do have available to us something like 10 million tonnes of scrap per annum, and that scrap is of better quality than, say, the scrap that's available in the USA, because it hasn't been around the cycle so many times yet, so it hasn't got inherently built into the iron things like copper and tin that can cause problems.

So, one of the things that I think could be a major opportunity is to have an early stage support around how we can start controlling scrap in the UK, segregating it—Port Talbot's an ideal place to do that, because it's going to be a free port—and creating the scrap quality mountain, let's say, that will be required by one of the world's largest electric arc furnaces, if that's what gets built. If we don't take that position, it's not the UK we have to worry about, it's the rest of the world and the rest of Europe, because if they're ahead of the curve and they create the supply chains using UK scrap, game over.

I agree with everything my colleague has said, I would just add that we also have to look at the decisions in the context of the location we're in, and so, those varied approaches that are taken elsewhere in Europe can't necessarily be exactly replicated in the UK context. So, there are specific structural, logistical and economic decisions that need to be considered in how we go through a transition, and here, we've seen that EAF is the choice that's being made.

Yes, I completely agree with what Claire just said. I think every steelworks, if you look around the world, is completely different in its layout, because it's been built and grown a different way. So, the place-based argument is really important to consider in this context as well, and not only think about whether it's an outlier from a European or a global perspective. But I've been too long out of the steel industry to make a real sensible point on this.

Okay. Thank you. My final question, then, is that Tata argues that all the major steel players will need to move a significant portion of their steel making to EAF as alternative technologies are way away from the right technological readiness levels for it to make any significant impact in bringing down carbon dioxide through the traditional pathways. Can I just check with the panel to what extent, then, they agree with that assessment?

I can say something on that. Why not? I'll kick off. Right, I mean, I would broadly agree that most of the world's steel players are going to move towards using more EAF, particularly as green electricity becomes more and more the norm. And, although that might not be the case in economies that are growing massively, like India, where they're going to need more and more raw iron to feed their economy as it grows; in a mature economy like ours that has more scrap than it uses, the opportunity is there.

Hydrogen DRI is only going to be commercially relevant when the price of hydrogen is sensible, and that's going to be some time ahead. In the meantime, people will use natural gas to do DRI, and I suspect that that's probably what will happen mostly in Europe, as a starter. But that's not necessarily solving your carbon emission problem, and in particular, natural gas EAF routes, which have been popular in America, have been made so by fracking. And that's not, again, something that is likely to be something we want or are able to do in Europe.

Yes. I think it's important to realise that the steel industry is ultra conservative for the right reason, because they compete in a globally competitive space and they can't afford to have a piece of equipment offline for four weeks, because that's all the profit, theoretically, gone. They work with very small margins. So, they are ultra conservative with the choices they make, so that's one thing, and it's important to think about it, because they talk about technology readiness levels in a very conservative way, more than other companies would do, because the margins are relatively small.

But there are options to actually consider, particularly when it comes to carbon capture and storage, but more importantly, I think, if you look at carbon capture and utilisation and that's the production of sustainable aviation fuels through ethanol made from carbon dioxide. There is a plant operational already in Belgium that does that, the same company that plans to build something in Port Talbot, project Dragon, which has gone into planning. And there's also a very big plant that is available up in Baowu steel. It's all about, again, economics and how to make it work.

Again, it comes back to the previous point I made, which is that, even with the CCU element, the sustainable aviation fuel, we're still waiting for UK Government to come up with a defined SAF mandate that determines that, by law, we need to have 10 per cent of SAF in our aviation fuels, and also come up with a sustainable aviation fuel revenue support system that is a contracts for difference type of mechanism, to also make sure that this, in the short to medium term, is also financially viable for an operator. Those decisions are not there yet. Again, going back, they haven't started to make any decisions on whether that's the right way to go, so it is all hinging on significant support systems being available to plants in south Wales to actually start considering, as part of their business models, some of these alternative solutions we're talking about.

I'd just underscore two things that my colleagues are touching upon, and I agree with. The first is that this is a first step, so this is not the end. EAF is the first step in the short-term movement towards decarbonisation. Secondly, in terms of getting our heads around how Tata is approaching it, they're making a bet on a proven technology and a proven method of decarbonisation. That doesn't mean that further methods are off the table, it just means that they're placing all their eggs in this basket for this moment. And so, if we think about this in terms of the steps to get to our end goal, then I think this makes a little more sense in the context of the steel industry here in Wales.

Thank you, Chair.

Thank you, Vikki. I'll now bring in Samuel Kurtz. Sam.

Diolch, Gadeirydd. Thank you very much for joining us today, and it's an interesting perspective, hearing from academia and industry following the trade unions earlier this morning. They've called on Tata to keep one blast furnace open until the electric arc furnace, the EAF, is built. To what extent are steel producers in other countries transitioning in this way, and are there any examples of that? Professor Worsley, we'll start with you.

Yes, in other countries, there are examples where transitions are occurring in this way. I would say, typically, with larger assets, probably, so more like 8 million tonne works as opposed to 4 million tonne works, and probably with an asset base that has had a consistent level of investment over the years, and, therefore, is capable of working without breaking. I think the issue for the Port Talbot site is that it all comes down, at the end of the day, to the financial conditions. In some of these other European countries, there are quite considerable subsidies on energy pricing, and there are not so many hurdles to get over in terms of keeping some of these older assets operating. So, I think there are lots of good examples of how you could do it.

I think the multi-union plan is extraordinarily well thought out and it does, probably, deliver what could be a future, but that would have to be, in my opinion, anyway, at least underpinned by a significant underwrite for some of the consequential losses that Tata Steel itself, as an international organisation, would have to take on to get from here to there. I think it probably would end up in a more—. It would have to create two electric arc furnaces then, because you wouldn't go straight for the leviathan, you'd go for the smaller ones, and whether that's the right decision or not, I couldn't tell you at this point.

Okay, just on that point, then, are you aware of any reasons why this approach would not be possible at the Port Talbot site? When we had Tata in, they discussed some physical constraints. Are you aware of any issues around why that transition, while keeping the blast furnace open and—

I don't have sight of what the total plan is, but knowing the layout of a steel plant, you've typically got a sinter plant or a coke oven sinter plant, blast furnace, basic oxygen steel plant, casters. In the new model, you'd have an EAF, which needs to feed the casters. So, I guess one of the structural issues is, potentially, that in order to put the EAF in the optimal position for the casters, that might preclude the positioning of where the BOS stuff, the steel-making kit, is at the moment. I don't have full detail on that, but that would be a constraint that I could see, logistically, being something that an integrated works would have, because you'd ideally sit the two things next to each other so you're not transporting hot metal around and losing energy all the time.

Thank you. Ben, any thoughts on the transition, keeping a blast furnace open—

Yes, I think the—

—during the EAF construction?

Yes. Thanks for your question. I think the important thing first of all is to start thinking about what actually a blast furnace does and what a basic oxygen steel-making plant does, because we often discuss that the blast furnace has been replaced by EAF. That is technically incorrect, because the blast furnace reduces the iron ore and creates hot metal. And that hot metal is then being converted in the basic oxygen steel-making plant into steel. The equivalent of a converter plant, or the basic oxygen steel-making plant is the EAF, the electric arc furnace. The equivalent of a blast furnace would be to have a DRI plant—direct reduction iron plant—or a hot-briquetted iron plant, or whatever that might be.

So, I think that is a bit of the kind of like the difficulty in the discussion, because, actually, EAF is not replacing a blast furnace. It's replacing the basic oxygen steel-making plant so it can use more scrap in its mix. And so if we then look at where the issues are with keeping one blast furnace open, if you want to put an EAF, particularly such a big one, in the perfect location, and you want to do it, as Dave said, quite close to the casters, where currently, the basic oxygen steel-making plant is working, you will want to put it into the same building as the BOS plant, the basic oxygen steel-making plant. But that becomes very difficult if you have hot metal travelling in these large thermoses, the torpedoes, from the blast furnace to this plant where people are working, constructing, and putting a half-a-billion-plus construction plant down. So, that is, I think, what the major thing is around this particular transition part—it's about how do you ensure that people can work and construct our things safely in an area where you're going to have significant levels of hot metal.

So, do you think, then, that that's one of the largest question marks when it comes to the unions' alternative plan—what you've just described there in terms of location and structure and the link between all parts of the steel-making process?

It is absolutely correct, but I think if you are going to the unions' proposal, and I'm talking about the GMB/Community proposal, then they will have the small electric arc furnaces, and there are ways of siting that at a different location than you would do in this place. So, you would have that. So, the smaller plant will potentially give that opportunity, and I know that, in the past, plans have been made in that place, but you also have to take into account that this plant, Port Talbot, has been built on reclaimed land, and I've been involved in over £150 million-worth of projects in that place, building the BOS gas recovery scheme, all those things, and piling and ground conditions are incredibly big project risks and bulk up a lot of cost. I completely understand from a 'I want to reduce my project risk' kind of basis, that you want to build it in a place where you know where the foundations are; it's much more predictable. So, from a project de-risking perspective, I can understand why Tata is making this decision.

Okay. Anything to add, Dr Richardson-Barlow?

Yes. I would just say that the question touches upon what's happening elsewhere, and what are the examples we're seeing, and we need to remember that the diversity of approaches reflects the complexity of the situation on the ground at these different steel mills and sites. So, what's happening in Romania, for example, is not necessarily the same transition that we can make here in the UK context.

So, it's quite a unique perspective—

Yes.

—when looking at Tata in Port Talbot.

Yes.

Thank you. Staying with yourself, then, if you don't mind: what might be the potential environmental impacts of taking the approach that—keeping a blast furnace open and an EAF?

Keeping a blast furnace operational alongside a new EAF while it's being built will result in higher carbon emissions, so part of the plan and the incentive on the decarbonisation side is that you're shutting down the higher emitting in favour of the lower emitting, and that would be a sort of broad-sweep way of addressing that.

Okay, thank you. And, Ben, you've made it quite clear today that it's not an environmental decision per se, it's an economic decision. Is that your analysis around this transition question as well?

Yes. I'm not completely in agreement with Clare about this, because I did think that it depends all on the level of scrap that is going to be used in the plant, so the territorial emissions will have a significant difference on what they do. So, keeping one blast furnace open, shutting one down, and maybe think about the coke ovens and all those—it really depends on the scenario, which plant stays open, because the steelwork's not one plant, it's multiple plants together. So, the scrap level usage will determine how much territorial emissions there are. I doubt, in the short to medium term, there will be any significant change in global emissions, because we're just robbing Peter to pay Paul. So, I think that's the important thing to mention.

But I think the other element that we don't talk about enough is air quality. And I do think that, particularly with the age of some of the plants—the sinter plant but also the coke oven plant—if you shut those down or you don't do anything, there will be significant difference in air quality. If you keep them operational with the current state they're in, that will have an impact on the air quality. So, it's not only carbon dioxide emissions, not only nitrous oxide emissions, not only heavy metals, but it's also air quality elements here.

Okay. Thank you, Ben. Professor Worsley.

I think, just to add to what Ben said, the carbon dioxide benefits on a global scale are marginal, because steel is a global business and if you take all the scrap and you put it here, then somebody else is making more iron over there and all that kind of stuff. However, I think, critically, we do have an opportunity in the UK to use a lot more scrap. I think, in reality, both of the plans intend to do that. So, the union plan is to increase a lot of scrap use in the blast furnace and increase the percentage of scrap used in BOS. So, both of those—good news. But critically, you've got to get control of the scrap quality and the scrap supply chain. If you don't get control of that and it's all left at free market, whoever puts that largest cash offer in will get the scrap.

Well, sticking on that scrap metal theme, then, I know that British Steel is proposing to adopt a similar approach in Scunthorpe and Teeside. How likely is it that Tata could source the amount of scrap that is necessary to satisfy their plans?

I think the British Steel Teeside configuration, let's say, is not the one that we'd need to be concerned about. The reality is that the scrap that they can use for producing the product mix that they've got doesn't have to have the high quality that Port Talbot needs. So, the challenge would be more on the global and European scale. If ThyssenKrupp Steel in Germany and Arcelor in France go hell for leather and have got a really good high-quality thing and they need to buy all the scrap and they're prepared to pay for it, if we have no control on scrap flows from the UK, ultimately that's where it'll go because it's a free market and the worst outcome of all for me is that we end up using the free port as an exporting opportunity for scrap.

Interesting. Any other points from the panel on supply chains for scrap? No. Thank you.

So, in terms of quality, then, and the quality of steel being used, Tata has said that more work is required around ensuring that it can make the products at the quality required, but they believe that technological developments are evolving. How likely, panel, do you think it is that an EAF will be able to produce the same types and grades of steel that a blast furnace can make by the time a new furnace is scheduled to open at Port Talbot? Ben.

I think the important thing is that I see EAF like a Dutch oven. That may be a good thing, yes? You can make whatever you need and it really depends on the ingredients you put in there. So, for me, I think it's, again, a misnomer to say, 'EAF, can it—[Inaudible.]' Yes, of course it can, but it depends on what you put in there. So, if you hire a Michelin chef, you get Michelin starred food out of it. If you are putting crap in that, you get fast food out of it.

Does that come back, then, to the supply chain issue in terms of that—?

Absolutely.

So, if we're looking to satisfy the high-quality outcomes in terms of material, then we're reliant on a supply chain of high-quality scrap steel.

Yes, or HBI or DRI, or whatever you need in order to get—. You need to have maybe some alloys in it, because that's what you do in a BOS, basic oxygen steel making, plant, in a convertor vessel. That's where you actually concoct your chemistry for the steel and the product you're making. And that goes into your cast and that's been rolled and that sort of thing. So, actually, EAF is almost like whatever you want to do with it, as long as you actually put the right materials in.

And you mentioned there, then—sorry, panel, I'll come back if anybody wants to jump in—the DRI, the direct reduced iron plant that Port Talbot potentially could be looking to invest in and construct. Is that a necessity, do you think, to satisfy steel making at Port Talbot with an EAF or is that a 'nice to have'?

So, there are two elements to this: so, from an order-book perspective, I can't comment, because if you want to satisfy your customers, I don't know what the current order book is because I've been away too long, so I don't know who they serve. So, Dave is probably much better suited to talk about that. But from a decarbonisation perspective, I think it is important that we control, to a certain extent, the emissions we emit by the consumption of steel in the UK. We import 20 million—or we use 20 million, and we have about 10 million to 11 million tonnes of scrap arising. So, we still rely heavily on the blast furnace BOS route or other routes. It would be better for us as a country to control the emissions associated with it. So, if we were to have a DRI plan, be it hydrogen driven, natural gas, carbon capture and storage or whatever that's going to be, we are in control of that. We can control how much emissions are associated with that, and that also then controls how embodied the emissions are in the floating structures we're going to put out at sea. And that reduces the time over which the carbon is being paid back, all those things. So, there are two elements to this.

Okay. Just before—I can see you jumping to come in, Professor Worsley, but just sticking with Ben on this point—Baglan bay's natural gas connection and that opportunity: is there an opportunity there in supporting DRI in Port Talbot with that gas connection?

In principle, the infrastructure is there. So, the infrastructure is big enough to support a 500 MW electric, which is about 1 GW thermal. You can create 3 million tonnes of DRI with that. There was actually enough size to build another big power plant. SSE was putting planning permission in to build one alongside it, using the same connection. So, when I heard other people talking about, 'There's no infrastructure', the infrastructure is there. There's probably no better place to put a DRI plant from that perspective, although it's still 4 miles, 5 miles away from the steelworks. But there is actually a natural gas transmission connector main there that would support that volume.

There's an another element to this, it's the economics around this. Can you run a DRI plant at the current natural gas prices? That becomes difficult because, as Dave said earlier, a lot of them are driven, in particular in the US, by shale gas, which has a significantly lower cost. So, that's another element to this. So, there are two elements to this. Can it be done technically? The answer to that is 'yes', because the infrastructure is there. We're building hydrogen infrastructure, if the plan that we planned to do with the south Wales industrial cluster comes to reality. It comes to the same point, because we're planning to connect project HyLine up with that connection up into the natural gas transmission line. So, actually, that point will become a very important convener of important infrastructure. But then there's the economic element, and I think those two are not necessarily the same at the moment.

Okay. Thank you. Professor Worsley, you've been very patient. Thank you.

That's all right. No problem. I'll speak very quickly instead. [Laughter.] The key question there: can we make the stuff that Tata needs to sell using scrap? Yes, if we can get the quality right. But that is not without its challenges. So, I think behind the transition, there needs to be a really significant technical resource put in place, which isn't—. Our universities work with Tata, but there's no funding to support that activity, going forward. With the DRI, I think there is absolutely a case to have a UK DRI plant. I don't know where to put it, but I agree with Ben that Port Talbot is as good a place as any, given all of the infrastructure available.

On DRI, one of the great unknowns is the quality of the feed stock that you need, because for hydrogen DRI in particular, you need very pure iron ore, and as everyone rushes down that route, the price of that is going to go astronomical. So, I think, again, these all come back to the economics of all of the decisions that are being made. Port Talbot has got so many good features—its deep-water harbour, it's got the gas connection, it's got the electrical connection, the connections into west Wales's energy infrastructure—it makes sense for it to be the home of steel production, and we should be looking to grow the opportunities of steel in key markets: steel houses, why aren't we doing that? Mass production.

We're working with Japanese firms who are ready to come to the UK to build the houses that our current construction industry won't at a rate that they would find frightening. Equally, when I'm in Japan, I can buy a steel can with a hot coffee in it with a screw top on it. That's better than a PET one—just saying—because you can recycle it infinitely once you've got things going. So, we have this unique opportunity, I think, to seize the positive, and by doing that, we actually should get the community buy-in, particularly from the younger people, because those are the ones who are being sold down the river with a—. Imagine if Port Talbot turns into—no disrespect to people from Ebbw Vale—what Ebbw Vale turned into in the period of time when the steelworks exited. It's not a good place to be.

Okay, thank you. Dr Richardson-Barlow.

Yes, I would just add a couple of things. On the EAF side, we're talking about flexibility and efficiency, and that goes along with some of the things that Ben touched upon. But there are also, on the scrap, and then, the DRI side, some important market dynamics. And what I mean by that is the variability that we can't predict. What will the scrap availability be like? We have an opportunity here in the UK, but we'll also be—for a short time, a medium term, four-ish years—susceptible to global scrap supply. And, then, when we bring in DRI, you have challenges associated with gas prices, but also market volatility. We saw with the Russia-Ukraine crisis gas impacts on industry in a variety of ways.

Okay. Thank you, panel. Thank you, Chair.

Thank you, Sam. I'll now bring in Luke Fletcher. Luke.

Diolch, Cadeirydd. I've found this evidence session really interesting, and a lot of the questions I had around DRI have been answered. But if I just turn to the politics of it for a minute, much has been said around—and I think the Minister for Economy has said this, I've said this myself—the current proposals on the table simply offshoring carbon emissions to other countries. Is that fair to say?

Yes, I would say.

Yes.

Yes.

Do you want to go first?

I think the reality, as we've said all along, is that steel is a global market. The people who are making automobiles in the UK will have to buy their steel from somewhere. But where the opportunity sits—which is where we need to focus on—is if you can genuinely make steel that has no carbon negativity in terms of its energy input. Why wouldn't you use it to make houses? Why wouldn't you use it to make electric vehicles? Why wouldn't you use it for packaging? Because, suddenly, it becomes the material that everybody would want. Because even a tree has a carbon penalty, but if you've got steel that's come without a carbon penalty, which at the end of its life can be made into more steel, which can go into products, that's the circular economy. I think Port Talbot could become a real global inspiration for how the circular economy works, because a lot of the elements that cause trouble for steel makers, like copper, if you can get those out—. Ultimately, when we're all using electric stuff more, the copper price is going to go through the roof.

Because to get to that point where we're creating genuinely zero-carbon steel, the case that we've been making is it's better, then, to site steel production in places where there are better regulations.

Yes, but I think what I would also say here is that you've got to look, clearly, at the asset configuration and its performance as well, because the reality is, across the world, many of the steelworks that exist now that are supplying steel are new, and, therefore, have been designed with as many mitigation steps as can be in there. So, it's a very complicated calculation.

I think, from the point of view of national security, we need to have a secure, successful and sustainable steel industry, otherwise we become, like Napoleon described us, a nation of shopkeepers. And I haven't got anything against shopkeepers, but the idea is, if we have this manufacturing sector, powered by green steel and other energy inputs like hydrogen, then we are a modern economy and we're competitive with our G7 friends.

I'm conscious of time, Chair—and I know Buffy's interested in asking about electricity costs, which I think are actually going to be quite important here—but if I could just ask a very brief question: what role can the UK's planned implementation of a carbon border adjustment mechanism play in supporting decarbonisation?

I can answer that question. I think it does play a really important role, but also comes up with another danger as a result of it. The carbon border adjustment mechanism puts, basically, a ring fence around the area that is being covered by that, so, with the UK doing it on its own, it's the UK on its own. But what's most likely is that we have some form of relationship with Europe going forward. In that particular case, it starts to amplify regional differences.

So, as I've already said, the north of England and Scotland already have access to some of the hydrogen and carbon dioxide business model support systems. And it will really put them at the forefront of some of these decarbonisation agendas, particularly if some of the companies in the UK, and particularly the ones that are in the south Wales area, still pay for the UK emissions trading scheme and are not able to reduce their carbon emissions yet because they don’t have access to infrastructure. It starts to amplify regional inequality, which is not just and which is a really important thing to consider when we talk about the implementation of CBAM.

The other thing is that we are talking now at the moment around what is the best way forward, and we're asking for decisions to be delayed. But by delaying the decisions—the CBAM is still going to go ahead in 2027—we actually make it even more impossible for them to have a sustainable business. Because if a project, like the EAF project, or something else, goes well beyond that implementation point of CBAM, we end up making the business even more financially unsustainable.

So, we need to be very careful with some of the implementation steps around the CBAM part and also consider that in our decision making, not only now, but also what it might mean in two, three years' time, because CBAM could actually pose an additional risk if we're not careful. So, it has two sides: it protects against global competitiveness in the long term for investments like EAF or DRI to be made, but, in the short term, it could cause a lot of pain if we're not careful.

Can I just link this all together? You mentioned—and I know electricity prices will come up later—policy and CBAM implementation; this is all really closely tied together. The policy implementation that needs to occur for us to have a really strong, thriving, decarbonised, home-grown steel industry is one of the most important pieces here, and that means that the way we are taking part in CBAM, and how quickly this is coming into play, matters. It means that CBAM has the potential to play a really important role in decarbonising a variety of industries and really helping us on our pathway to net zero. But it also means that the other polices that are really difficult as well to get in place, like electricity pricing, have to come at the same time.

I think one comment from me on that is that once the decision has been made, it needs to be stuck to. So, if you think about the electric vehicle situation in the UK, everything was going to be electric by 2030. So, BMW Mini, Nissan and Jaguar Land Rover were all pushing for electric vehicles in their main market, and then, suddenly, everybody flip-flops, and maybe it'll be 2035, or maybe 2040, or maybe hybrids are actually electric. And that's really unhelpful, because the investment decisions that people are making are based on the current knowledge, and if they can't trust that that's going to stay the same, why would they invest in the UK?

Diolch, Luke. I'll now bring in Buffy Williams.

Thank you, Chair, and thank you for joining us this morning. It's been a really interesting panel. I have some questions on electricity costs and infrastructure. How much more energy intensive is the EAF than the blast furnace? And do you have any concerns about the ability of the electricity grid in south Wales being able to support the EAF?

I could comment on that. I think the important thing to say, coming back to the point earlier, is that EAF is not much more energy intensive than a blast furnace because they cannot be compared with each other. What you can do is compare a blast furnace route with a basic oxygen steel plant with a full, 100-per-cent DRI route with an EAF. Both of them, using completely virgin iron ore, will actually have a similar energy intensity. The more scrap you're going to put in, the energy demand comes down. So, that's an important thing. And, mainly, the energy comes, for a blast furnace BOF route, from coal; for a 100-per-cent DRI to an EAF route, it comes from natural gas. Then you have the electric arc running on electricity. So, those are the key things you have to consider when you talk about these kinds of things.

And when you talk about the grid ability to support an electric arc furnace, then I, of course, have big concerns because we haven't had any significant infrastructure improvements for the last decades in the south Wales corridor. But what I've heard from some of the evidence that's been submitted is that they already have a connection agreement. So, clearly, there's been a solution. But it actually makes me worry about all the other projects that were going ahead or planned, because I do know, as a fact, that some of them have been given a notification that it will now take another five to 10 years. So, there clearly has been some form of prioritisation that happened, which can detriment future green growth in south Wales, because we haven't got any significant infrastructure plans between now and 2025 for improvement. So, I think they've managed to get on top of the priority list, which is great from a Tata perspective, but not necessarily great from a south Wales perspective.

Professor Worsley.

I was just going to say, in terms of the actual question, 'How much more energy intensive is EAF than a blast furnace?', as Ben says, if you were going all the way from raw materials, they're very similar. The thing that is always not considered with the blast furnace is that a lot of the coal energy that's used is actually used for reducing the iron. So, the actual consumption of energy in total to produce a tonne of iron is something like 5 MWh—and this is from my colleagues in SUSTAIN, our steel innovation activity—and for EAF, if you just used that, it's measured in hundreds of kilowatt hours. Now, clearly, those two things have to be balanced against the production of something that someone wants to buy, and that's where the transition has to be really carefully handled.

In terms of the grid connectivity, again, as Ben has said, people are saying that it's done, but also, in order that we can provide green energy, which will create wider economic opportunities for manufacturing and other things to come to Wales—. The semiconductor industry, for example, uses masses of energy; if that could be all green energy, that would be a real good sales pitch.

My personal view is I don't think the grid has had the level of investment that it needs to deliver that, and that's represented—. Down in Cornwall, for example, there are now restrictions on people putting solar farms and things in, because, like in Star Trek, 'The grid can't take it, Captain.' And I think this is a role for Government and agencies of Government to push, because it is something that is under the control, loosely at least, of national Government policy. Get the energy right and it's like Wrigley Field: 'Build it, and they will come.'

Dr Richardson-Barlow.

Yes, I would just add—I agree, of course, with everything they're saying—that when we're talking about decarbonisation and decarbonising our economy, this sort of grid modernisation should be happening. We should be seeing these updates occur. I completely take the point that the prioritisation has impacts in other industries, but, as a whole, this should be happening. So, if this is the incentive and the push to make these grid modernisations—reliability, affordability, et cetera—better, then, on the decarbonisation side, this is all good, this should be happening.

Thank you. With low-carbon approaches to steel making being electricity intensive, and UK energy prices being high, will Tata and other UK steel makers be in a position to compete effectively with those from other European countries?

I think the answer is 'yes, potentially', and it comes to a couple of things here. So, first of all, it was great to see that, finally, there is some kind of initiative called the British Industry Supercharger, which, effectively, starts to make network charges minimal for energy-intensive industries like Tata. The energy costs will then be basically dependent on the wholesale electricity market, which is very similar to what they are in Germany and France, where a lot of the additional costs—the charges that we see in our home life—have been removed to allow them to compete Europe-wide, but also globally.

What the Germans and the French are doing on top of that is they actually provide some further certainty on the prices. Because what happens in the electricity market is that it is based on the marginal cost of electricity, which, generally, is the cost of putting natural gas through a power station. What they do in Germany and France is they actually agree longer term power purchase agreements, which basically removes the volatility. What they tend to do is underwrite those power purchase agreements with a generator—nuclear in France, mainly; in Germany, it's a lot of the brown coal and other kinds of power generators. They physically underwrote them and said, 'Okay, we know that you can't enter into these long-term agreements, but, as a Government, we will give you that rate for a period of time and underwrite that', and it's almost a trilateral kind of agreement between industry, the generators, as well as Government. And I think that's something that has potential, particularly if we are starting to deploy a lot of renewables up in Wales. What stops Welsh Government, what stops UK Government, from doing something similar? Because the risk is relatively low from a taxpayer perspective, but gives certainty to the industry that there is a low—or actually 'cost-competitive' is probably a better word for it—power price that allows them to compete globally continuously, not in one year, and in another year they don't.

Dr Richardson-Barlow.

I'm sure you've heard the statistic that UK steel makers pay roughly 60 per cent more than European counterparts for electricity. This is a major sticking point for steel decarbonisation broadly, UK electricity prices. Steel makers have been saying this for years. We've seen this in research, looking at where the UK falls compared to European counterparts, and we've also seen this in terms of broader net-zero plans. So, addressing the electricity price concerns is a priority not just for Port Talbot, but for the steel industry broadly in the United Kingdom.

Finally, if I could add, the stability of pricing is absolutely critical, and it's a bit like the stability of policy and the stability, you know—. These investments don't pay back in a year or six months; it's not like flipping a house in Chelsea. It's something that takes a lot longer to realise its potential, but, because of the way in which steel underpins all of the other things—. If you think about the green economy, it's all either made with or by things made of steel, and if we can create a sustainable steel industry led from Wales, powered by green energy ultimately, it could be globally significant.

And I think the other angle around electricity, which hasn't come up today, but I meant to feed it in, is also considerations around the broader term of green energy to make sure that we're not eliminating things like SMRs—small modular reactors—from our equations. I'm not sure if Britain is up to doing the construction of giant nuclear power stations, because it doesn't seem we're able to build a railway line in a straight line, but the SMR technology that Rolls-Royce have, not only is that something that could power industry, but it's more distributed. So, it might actually work better with our somewhat more antiquated grid.

Thank you. Thank you, Chair.

I'm afraid time has beaten us, so our session has come to an end, but thank you very much indeed for being with us today. Your evidence will be very important for us in scrutinising this matter going forward. A copy of today's transcript will be sent to you in due course, so, if there are any issues with that, then please let us know. But, once again, thank you very much.

Diolch yn fawr, pawb.

Thank you.

We'll now take a short break to prepare for the next session.

Croeso nôl i gyfarfod o Bwyllgor yr Economi, Masnach a Materion Gwledig. Fe symudwn ni ymlaen nawr i eitem 5, sef dyfodol dur yng Nghymru. Dyma'r ail o ddwy sesiwn heddiw gyda phanel arbenigol i drafod materion sy'n ymwneud â dyfodol dur yng Nghymru, gan gynnwys canolbwyntio ar ddatgarboneiddio a'r effeithiau ar y gweithlu a'r economi leol. Gaf i groesawu ein tystion i'r sesiwn yma? Cyn i ni symud yn syth i gwestiynau, gaf i ofyn iddyn nhw gyflwyno eu hunain i'r record? Efallai y gallaf i ddechrau gyda Vera Trappmann.

Thank you. My name is Vera Trappmann, I'm professor of comparative employment relations at the University of Leeds, at the business school, and I have been doing research on the steel industry, mainly in Europe, during the last 15 years.

Thank you. And Dean Stroud.

Yes, Dean Stroud, reader in skills and workforce development, school of social sciences, Cardiff University. Like Vera, I've been researching the steel industry and really the workforce implications of technological change and other things since, probably, about 2001.

Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a few questions. Does the approach proposed by Tata Steel sufficiently balance environmental and carbon reduction goals with the wider social and economic impacts on workers and communities, in your view? Who'd like to start on that?

I'm happy to, if that's okay.

Dean, yes, absolutely.

My understanding of this is that, with the shift to electric arc furnace, there will of course be savings in terms of carbon emissions and a much greener steel industry. My concern is the way the current plans are configured and that the effects on the community will be hugely detrimental, socially and economically, and to some extent unnecessary, given that, from what I understand, there is not a need to close the blast furnace at this current time and that it can actually be continued until 2032 and maintained. It's not as if what is being asked for is for relining, but that it can be maintained until 2032, and this would help save some jobs. That would be my response.

Shall I jump in?

Yes, please.

I think the question of if the environmental goals are achieved needs to be looked at very carefully, because we have a huge risk here of carbon leakage—so, there needs to be imported steel from countries with lower environmental requirements. At the same time, we see in countries like China still an extension of blast furnace capacity, so they are still building blast furnaces. So, the overall environmental impact is maybe not that straightforward.

The real risk I see here is that—I think in the previous panel it was underlined—there are huge economic reasons behind the current proposal. The losses that Tata Steel are making at the site seem to be a huge driver of the quick switch to the electric arc furnaces. I see a real potential risk and danger here if the public perceives that the decarbonisation of the economy, so the greening of the economy, means job losses. Therefore, I think it's really clear, to be very open about what are the drivers that are behind this. We all know we have to reduce the emissions in the foundation industries, in the steel industry in particular, but here there seems to be an overlap of reasons.

I think it's important to have this, because the transition to a greener economy needs to be perceived as fair and just by workers and the public, otherwise—and we see this already in other European countries—it gives a push to the far right. We have seen a pushback in Germany, for example, with a Government that was putting very progressive suggestions on the table regarding climate mitigation, and this has been watered down because the far right has used this to mobilise, because it looked like the costs of this greening, of the transition, wouldn't be redistributed equally. So, there is a clear danger. Therefore, I think communication is absolutely key. This is also something that, having observed the transition in Germany, you could say there was a clear mistake in how the Government communicated some of the projects that they were planning along the line of greening the economy. So, it's really important that the Government here and the company have a clear and honest communication strategy, and, if the company doesn't have it, that that is rectified by the Government. Thank you.

Can you tell us how much more energy intensive is the electric arc furnace than the blast furnace?

Do you want to go, Vera, or shall I?

Yes, I can quickly start. There are much fewer emissions per tonne of steel produced, up to six or seven times fewer emissions, but it really depends on the availability of the electricity, and that we have it from renewable energy sources. So, a switch really means that there needs to be an assurance that there is enough renewable energy available, and, as the consumption of electricity is much higher, there is then also the question of the cost of the electricity. Otherwise, we switch and it's at the risk of competitiveness. So, the prices have to come down, and electricity is much cheaper in other European countries—we have heard this today already. So, the electricity costs in countries like Germany are 60 per cent cheaper, and if prices don't go down for the UK, there is a real danger of a complete relocation of the steel industry. Just to add, at the moment, the prices in other countries are lower, but there are even further discussions within the Government to ensure a kind of bridging industry energy price, so that the foundation industries have a guarantee that they have a low energy price until they are greening. So, it's not just about the price at the moment, but also in the future.

Vera, from what you've just said, then, are you saying, therefore, that Tata and other UK steel makers won't be in a position at the moment to compete effectively with others from European countries?

I'm saying that there's a high risk that the high electricity price is endangering competitiveness. And the other thing that is important to note is that the environmental benefits are only guaranteed if we have renewable energies from the electricity consumption. So, there needs to be a huge increase in the amount of renewable energy we have available.

[Inaudible.]—went silent. Anyway. I think you're asking me?

Yes—[Inaudible.]—to this. Yes.

I'm not a technical person, but I understand some things that are going on. I would agree with Vera about the problem with energy prices and the fact that electric arc furnace steel is only going to be greener if it's based on renewable energy, and there has to be capacity for that. At the same time, I'm sure Tata's considered, in the switch to electric arc furnace, that they will be competitive on a European market, because otherwise they would not be looking at that switch. There will be other factors involved, of course, in that they have to make that transition, but they will also need to be competitive, and I think that will be part of their thinking. But, of course, being competitive is not just about the energy intensiveness of the process, but what goes on with regard to the restructuring of the plant and where savings will be made elsewhere, so, for example, with a reduced and rationalised workforce. Overall, it costs more to make a slab of EAF steel than it does blast furnace steel, but I understand that the blast furnace process is actually more energy intensive, if you look at it through the supply chain up until the chemical reactions that go on within the furnace and the energy that it involves. But, yes, I don't have the technical knowledge to know exactly, but those would be my thoughts.

I'll now bring in Vikki Howells. Vikki.

Thank you, Chair, and good morning to our witnesses. You've already touched on some of the pros and cons of transferring from blast furnace to EAF steel making. Is there anything else that you think we should be aware of there? And what other approaches to decarbonising Port Talbot do you feel could potentially be taken? Vera, do you want to start with that?

Yes, thank you. Apart from the availability and the prices of renewable energy, there is also the question of the amount of scrap steel available and the quality of the scrap steel. That is something when the UK has 10 million tonnes of scrap metal each year and they are exporting 7 million tonnes of that at the moment, and also there needs to be massive investment in the recycling of metal. So, it affects a broader cycle.

The alternative would be delaying; an alternative would definitely have been acting earlier and having an industrial strategy that would have looked more holistically at decarbonisation. And the alternatives like DRI, direct reduction, they need and require hydrogen, and at the moment Tata is outside of an industrial cluster from the Government that would provide hydrogen, so therefore the creation of the south Wales industrial cluster is absolutely vital, but it needs huge private investment, and therefore I think it's a task or a challenge to ensure that this investment looks attractive to private investors. So, it's not only the Government, but also the private investor. And I think the lack of an industrial strategy is what businesses are moaning about, so I think it would be beneficial for Wales to have its own strong industrial strategy where we lack a more British one. But the plans around the south Wales industrial cluster mean that hydrogen wouldn't be available until 2032, so there is the question of how you bridge this. And even if Tata built a direct reduction plant, then there's the question of what happens until then. I'm happy to talk about this later when we might talk about a just transition, but from the industrial policy perspective, it is really important that the region creates a long-term perspective that enables green steel, and it is important how this transition is now handled so that there is a trust among the workers, and also among the younger workers, to stay in the region and not think that this is just another round of deindustrialisation and then you face brain drain.

I feel we're bleeding into some of the questions that you might have for us later, but if I'm to address it directly, in terms of pros and cons first, then, clearly—we've touched on this—there's a clear pro in terms of reduction at the source of carbon emissions, EAF, being a cleaner form of steel making, should it be based on renewables. The drawback, the shortcoming, the con, whatever you want to call it, is to assume that the transition will be a smooth one. It's likely to require fewer workers and that will obviously come with social and economic consequences. I also think that we're looking at lower quality steel, lower levels of exports and greater imported carbon emissions.

Where we might look at alternatives, my understanding is that, in terms of things like carbon capture, the technology isn't there yet, as far as introducing it into the Port Talbot context, where there's carbon avoidance. Hydrogen-based steel, use of biomass—again, I don't think that that is viable for Port Talbot, as far as I understand. Again, I want to reiterate that I'm not a technological person, so this is what I understand to be the case. Where there is a premium in the market on EAF steel, it's with hydrogen-based DRI—that's the premium on the market, as far as I understand it—and that's what's been produced by SSAB in Sweden. It won't be the case, as far as I understand, for the electric arc furnace in Port Talbot, which is more commoditised, scrap-based steel, with a high content of non-decarbonised metallics. And that does lead to the question around scrap. I think you've got a question later about scrap, but if I can just say something about it now—yes, the market is poor in the UK. I'm involved in a project at the moment, based around scrap optimisation with electric arc furnaces, and I visited a plant in France—they import UK scrap and they use it for their lower grades, because it is such poor quality. We tend to export most of our scrap, and it goes to Turkey for basic rebar. And I have concerns that, to achieve the kinds of quality of steel that Port Talbot, or Tata might be looking to make, then access to that kind of quality of steel is going to be difficult, and there really needs to be a restructuring, realignment and thinking about the scrap market and the scrap provision within a UK context.

Thank you, both, and you'll be aware, I'm sure, that the trade unions have called for Tata to keep one blast furnace open until the electric arc furnace is built. To what extent are steel producers in other countries transitioning in this way, and could you give any examples of this? Maybe if we start with Dean.

Yes. So, I visited ThyssenKrupp Stahl in Duisberg in May, I think it was. They're investing in hydrogen-produced steel, and there are no job losses. The blast furnaces are continuing as normal until that is in place. As far as I'm aware, and I can keep my answer short, there's no closure of blast furnace sites across Europe whilst new, greener processes are being put in place. I could be wrong on that, but that's what I understand to be the case. I don't know if Vera knows differently.

Vera.

Yes, Eurofer has produced a map of all green steel projects across Europe, and, currently, there are 60 sites that are going green, one way or another, and often it is a combination of strategies. What I find interesting from that overview and this mapping is that the estimation is that it will cost $85 billion to achieve all those 60 projects, and the electricity demand will double for the steel-making process. So, the short answer is it is a broader variety of combinations of pathways. It needs to be considered how the foundation industries work together, where there might be synergies, also in terms of circularity and also the implications further down the supply chain. I've mentioned the risk of carbon leakage, so there's probably a bigger picture around resource efficiency. So, in terms of the change of production methods, there is a bigger picture around the linear production of steel in the first place. With the EAF, we have a level of circularity introduced, because you use the scrap steel, but there is potential to think that is much more far-reaching.

Thank you, and then, finally, to yourself, Vera, in a report on decarbonising the foundation industries, you talked about the potential benefits of steel makers decarbonising through developing a circular economy. Could you explain for us how that might work in practice?

Yes, so I'm a sociologist of work, so that's not my own research, but other colleagues have looked and calculated that the technological solutions alone, these technological improvements, wouldn't achieve a net-zero economy. So, we also need to look into material efficiency, which means how can we have the same kind of service, the same kind of life by using fewer materials. That means that we have to think more broadly, not only how we can produce the same amount of steel, but how can we design products further down the line of the supply chain that need fewer materials. So, can we shift to lighter materials? Can we optimise the design? Can we maybe substitute some materials? How can we extend the lifetime of products? Could some products have shared ownership? Could products be repaired?

Companies like Celsa Steel, for example, have been experimenting with those circular models and trying to introduce new business models, closing loops in the supply chain. So, they have been co-operating with demolition companies in order to reprocess directly demolition materials and delivering them back to the same site, where something new is built. That would require entire new ways of organising recycling, but also encouraging the resource utilisation by introducing transparency and tracking down the value of the materials through the supply chain. Some of the idea is that you have a classification of all steel bars, for example, and that you exactly know when something is demolished somewhere, there is a steel bar that still has a lifetime of 15 years in it, and it could be reused at a different site. So, the value of the circular economy for decarbonisation is not really yet accounted for, not only in terms of the emission reductions, but also in terms of the economic value that it could have.

Thank you, both. Thank you, Chair.

Thank you, Vikki. I'll now bring in Luke Fletcher.

Diolch, Cadeirydd. If I could just focus in a bit on the electric arc furnace proposal itself for a moment, we've referred to it already in answers to Vikki, but I'll ask last both questions at the same time. It's a bit of a concern, really, isn't it, that the quality and quantity of scrap could potentially be put under strain, because obviously we know that there is a similar proposal in Scunthorpe and Teesside. We know as well, of course, globally, people are looking to move towards electric arc furnaces. So, from a layman's perspective, at least, it looks like there's a real danger that there's going to be a real strain on the supply of scrap, not just within the UK, but potentially globally, and potentially then some of the negative effects that might come as a result of that on any electric arc furnace that's in Port Talbot.

And then, if I could just ask a second question as well. We hear two arguments all the time when it comes to an electric arc furnace. You've got the one side that will say that the electric arc furnace won't produce the grade or quality of steel to the same degree as a traditional blast furnace would, and then you have the other side—Tata being one of the people on that side—saying, 'No, no, it can produce the quality or grade of steel that we need to fulfil our order book as it currently stands.' So, I'd just be interested to understand from you guys what your perspectives are on that. Do you see the technology actually developing significantly in the run-up to the electric arc furnace being opened in Port Talbot? Because obviously, we are looking at that being a couple of years ago away, aren't we? I'm not sure who wants to start on this. Maybe Dean would like to start.

I think we've touched on access to scrap and good-quality scrap, which is usually determining in the quality of the product. I was looking at a table yesterday that actually said there's more pressure on iron ore at present than there is on scrap, but I think that will change. As we have an increasing shift to electric arc furnace, I think there'll be more and more pressure on acquiring the scrap that is necessary for electric arc furnaces, and particularly the high-quality scrap that is necessary for the product ranges that Tata might want to develop.

I also understand—and again, I'd like to put the caveat in here that I'm not a technological person—that there will be a smaller range of products that will be available in the shift to the electric arc furnace, and that in that sense, the order book would struggle to be met. This is why, in my understanding, there is a demand that the blast furnace is kept open until 2032, because that would give a broader range of products. Certainly, I think the technologies that will allow for the higher quality steel grades are not there yet just through the electric arc furnace route; for example, in terms of packaging. My understanding is that the quality is going to be difficult to meet just through electric arc furnace.

Of course, people will disagree with me; I'm perfectly aware of that. I can only go on what I've read, what I've understood from talking to others, and of course I've listened to competing arguments on this. Part of increasing the quality of electric arc furnace steel is around the involvement of DRI, but on that question, again there are competing arguments. Some say that DRI should be introduced and others say it's just not viable. Based on the balance of the arguments that I've heard, at the moment, I would say that DRI doesn't seem to be viable for the plant at the current time.

Thank you. Vera, did you want to comment at all?

Just very generally that it definitely will need investment in advanced sorting technologies for recycling and improved labelling of different grades of steel. The amount of metal recycling in the UK is currently quite low. The majority is exported, so, it needs investment into the sorting technologies so that we can have the scrap metal supply. So, it's improving the recycling infrastructures. And then, there is probably also a chance to increase the reuse of structural steel. At the moment, it's currently worth 5 per cent and some experts in the steel industry assume that it could rise up to 50 per cent. This is just not explored enough.

Thanks. In terms of DRI, would you agree with Dean's suggestion?

I probably would not like to comment on that question.

No worries. If I could move on, the idea of a just transition is something that we all talk about on a regular basis. What does a just transition look like for Tata's workforce in Port Talbot and, of course, its wider workforce in Wales? Dean.

A just transition, what does that mean? That means for me, obviously, moving away from high-carbon economic activity. It means taking workers and their communities along with that transition, but in ways that are not harmful. That means us maintaining as many jobs within the context of this transition at Port Talbot as possible. That is more likely to happen if we retain some blast furnace activity until 2032, as I've mentioned before. At a more general level for Tata workers and their communities, for me a just transition would mean ensuring transparency, offering clear communication. It would involve dialogue, protecting, as I said, as many jobs as possible. Where job losses might occur, it would involve generous compensation and social partnership on questions of retraining and job creation.

Just transition is about decent work and it's about creating decent work with regard to wage, worker representation, interesting work, skilled work, and that can only, I think, be achieved through engagement between the range of stakeholders that'll be involved. So, that's Government—Welsh Government and Westminster Government—local government, the unions, the employers and the community groups that would look to making sure that the transition serves everybody. That would be my general perspective on this.

I think Vera mentioned earlier the importance of industrial strategy. I would second that. I think Wales already has something of an industrial strategy in its—I can't remember the exact name of it, sorry—manufacturing strategy for industry 4.0. That needs to be enacted and reflect very much on the kind of transition that will happen in this particular region. It's on the M4 corridor—it has that advantage. What kind of investments can be made? And I know that's for the job transition board—which you might have a question about later—to consider, but the industrial strategy aspect is an important part, particularly because of the sorts of workers that will be entering the labour market.

If I could turn to Vera, how do Tata's proposals stack up against European steel makers in what they are proposing for a just transition?

I'm currently leading a project on just transition in 13 countries, where we look at what workers understand by 'just transition' and what they want from a just transition. And as part of this, we at Leeds have done a survey with workers in the UK, asking them what do they think about climate change and what do they think about the policy proposals regarding greening the economy. That is a representative study for all UK workers. We have done the same questionnaire with steelworkers, and we reached them through Community. It was quite interesting, then, to see what steelworkers think in comparison to the general worker in the UK.

I want to highlight here that it was really—. That survey is now two years old, with the steelworkers. Steelworkers were even more concerned about climate change than the average worker, but they were extremely aware of what they are going to expect from the steel industry transitioning to a green economy. The majority were saying that they were willing to learn new skills, and a huge number were saying that they were even prepared to relocate. So, they had a really full awareness that there would be big changes coming on. They value very highly, in terms of what transition policies they think are important, the free access to training, but also investment in new local jobs and in support for relocation if necessary. I think it's really important that workers are not disappointed at this moment in time and that there is, as Dean said, a good local industrial strategy on what to do with these workers. I have some ideas about this, but I wanted to make this loop before I answer your questions now more directly.

Yes, there is a lot to learn from other countries, I would say, in terms of how to manage this transition. There are two instruments that have proven very successful. One is the so-called transfer agencies, and the other is the so-called short-term work allowances. Both instruments try to do a very similar thing: they keep workers who are facing redundancy due to restructuring in employment. They are not made redundant, but they keep their jobs, the Government is paying their salaries, and they are receiving training during that period. The transfer agencies are for two years; the short-term work allowance is paid from the social security funds. So, it's not tax money, but unemployment insurance pays for it.

The idea is that it's, in the long term, more beneficial to keep workers in employment, with all the positive effects this has. So, first, you upskill them, you prevent or pre-empt all the other socially negative effects that restructuring often has on communities—so, the rise in the level of mental health problems, the impact on social cohesion, the impact on individuals' lives, marriages splitting up, children thinking they don't have a future in that area any more, rising healthcare costs as a consequence. So, it might look a little bit more costly for Governments, but the benefits are really huge. While these instruments have been used in the past in Germany during economic crises, they are now proactively introduced to manage the transition that is related to climate mitigation.

[Inaudible.]—you referred to earlier. I'm conscious of time, so it would be great if you would be able to write some of those in to the committee for us to consider, but if I can just ask one more question, Chair. And, again, I'll have to re-declare that I sit on one of the sub-groups of the transition board. But, thinking about the transition board itself and its terms of reference, do you think its terms of reference are reflecting the right priorities for the transition board and the direction in which we would then be looking to take going forward? I'm not sure who wants to take that up. I can see Dean nodding.

Yes. I mean, I have looked at this and its terms of reference and who's on the board, either as a central member or just attending. I think the immediate plans seem to me to be a bit problematic. So, I understand it to be divided into two parts: the second part being the plan for regeneration and economic growth, the first part really looking to mitigate the immediate circumstances that might occur should there be significant job losses.

Some of those things remind me of some of the initiatives that we've had in the past. It doesn't go back as far as, say, the programme for the Valleys, when we had that regeneration scheme for the coal communities, which was based on inward investment, but low-skilled, low-value-added inward investment, which soon left when labour was cheaper elsewhere. It reminded me a little bit more of Communities First, when that was running, which had some success and some failures.

But this focus, for example, on supporting people to start businesses would seem to me to be slightly wrong-headed. I don't think it's what workers would be looking to come out and do, out of such an event as we're talking about. I think that would need some rethinking. But in terms of the longer term plans—. And generally, the kind of—. It is just mitigating actions. Some will be of value, some I'm a bit more doubtful about, I suppose I should say, of their true value. We need to support people in terms of their health and suchlike, and it will be depressing for people to come out of work at Port Talbot, and you need to be mindful of mental health concerns and those sort of supports, but economically, entrepreneurship, I'm not sure if it's the right kind of focus.

More broadly, picking up on the industrial strategy question and the plan for local regeneration and economic growth and development, well, yes, if you can tie it into the industrial strategy that Wales is looking to develop and take full advantage of that—which I understand runs from the first year through for 10 years—then, yes, that would seem to me to have some legs, but it requires a proper and real strategy to be developed. Something comprehensive and coherent. I'm speaking in quite general terms, but they would be the general terms that I think would describe the approach that would need to be taken, not piecemeal.

Thank you, Dean. Before I hand back to the Chair, Vera, did you want to add anything at all?

I support what Dean was saying.

Great. Diolch yn fawr.

Diolch, Luke. I'll now bring in Buffy Williams. Buffy.

Thank you, Chair, and thank you for joining us this afternoon. I think you've just touched on one of my questions, what I was just about to ask, but I'll ask anyway, so we can delve a little bit deeper. Based on your experience of analysing previous large-scale redundancies in the steel industry, what are likely to be the major impacts on the workforce and the local community, and what are the key lessons that need to be learned from previous large-scale redundancies?

Do you want to go first this time, Vera?

Yes. I think we've touched upon some of this. So, obviously, first is the kind of economic implication and the loss of income, but there's also, then, the loss of identity. So, steelworkers are in an occupation that is well paid and that is well respected, so it's a source of recognition and identity. And if you take that away, that can lead to further problems, like mental health problems, and then health problems as such, which puts pressure on the region and the NHS system, with rising costs for healthcare.

It is always the kind of—. What are the further implications for the community? Is there a risk of deindustrialisation? How quickly is there a response to have new investors in the region? How quick is this shift? Because otherwise there is this doom and gloom for the younger generation, that they want to move away, and then you have the entire area deprived. So, I think pace is important, if you're asking for lessons learnt, that there are quick responses—almost even pre-emptive responses, before redundancies even occur that you have agencies that work together. The participation of workers is absolutely crucial, that they maintain a sense of agency and that they can shape the process, and that you invest very early on in reskilling. And for the greening of the economy, we have a huge lack of skills, so if you just think of retrofit or the entire repair area that will increase, we don't have enough workers in these areas. In a previous project, we have even seen positive examples where steelworkers were retrained for the healthcare sector or the care sector. That is an area where we have a real skills shortage, and while that also has something to do with mentality and identity, if a steelworker is doing it, we know from other countries that they were doing even a sectoral shift.

I think Vera touched on it a bit, and I think the main lesson—if you want to put it in a kind of saying—is, 'What can be predicted can be prevented.' So, we know what the impacts of redundancy and deindustrialisation would be. They're well known. So, we're talking about wide-scale generational unemployment, worklessness, high levels of economic inactivity, increased ill health, high levels of deprivation, and also the loss of skills from the region, so significant levels of outward mobility of skilled workers. And all of this comes at a significant cost to the public purse.

Of course, what's not happening in Port Talbot is going to be complete closure, as far as we understand at this current time. So, in that sense, the effects are likely to be quite uneven, and also fall on some categories of worker more than others. I would say that those that are more likely to be affected by job loss will be those that are actually going to find it more difficult to transfer their skills to elsewhere. For example, at the heavy end, it's going to be production workers that do not, for example, have the same skills profile as technical workers and maintenance workers, who may decide to up sticks and shift to somewhere else simply because they feel they lack the security anyway. There's also a question of skills and skills loss there.

Where I've looked at other large-scale redundancies—and I admit I haven't looked at this for a few years now—I've got one particular example in mind. So, when Tata was Corus, and Ebbw Vale was closed, unions became marginalised is my understanding of that. It was all based around rumour, and we've heard some of that with this event, that workers have complained that it's all been based around rumour, but my understanding is that unions have been consulted, for the most part, in a way that I'm not sure quite happened with the closure of Ebbw Vale.

What happened with the closure of Ebbw Vale, as you know, there was a new school or a college and there was a new hospital. I'm not sure that those are the sorts of jobs that ex-steelworkers were moving into. We know that there were not just effects on the male steelworkers, but the female partners as well. They, as far I understand, were the ones that were having to go out and find—if I can phrase this in a way that's a bit more sensitive—that were having to find work as well, to make sure of a standard of living. And the retraining opportunities that were offered just didn't reflect the reality of the labour market locally.

So, we know that we had workers, at that particular point in time, travelling down to Honda in Swindon, but staying within the community of Ebbw Vale. And I think there is a locality aspect here. Workers may move. Some workers may move. And we know that some workers, at the time when Ebbw Vale closed, moved to IJmuiden. But a lot—because it's generational, because they're close-knit communities—want to stay in the region. So, that's where jobs need to happen in the region. And this is what needs to be looked at in terms of the effects of redundancies, and the effects of deindustrialisation.

Thank you, Dean. Chair, I think Dean has answered my next question as well. Thank you.

Okay. Thank you, Buffy. And, finally, I'm just going to bring in Sam Kurtz. Sam.

Diolch, Cadeirydd. Thank you both for joining us today. Dean, just continuing your train of thought there with regard to skills. Obviously, the Celtic free port has been announced for the Port Talbot and Haven waterway area. Are there opportunities there? Are there transferable skills that workers at Tata already have that could be put to good use in the development of the free port? Rather than specific upskilling through the transition board, are there applicable skills that they have that are quite quickly transferable to new industry?

If you want a quick answer, I would say 'no'. But if you want a more complex answer—and I'm sure you do—if we think about the steel industry workforce, and the way I understand it to be comprised, at a very basic level, we're talking about operators, production workers, technicians and maintenance workers, as well as logistics. I think, for those most affected, which will be operators and production workers, working within the steel industry context is a very particular kind of context. There will be transversal and transferable skills. I mean, team working, for example, is a skill that has become important to steel production. Most modern steel plants, if not all, work in a team-working kind of way, and those sorts of skills that are necessary for that way of working will be embedded within these workers and can be transferable, but on the actual technical skills, I am very doubtful, as far as I understand the Celtic free port, that those skills would be easily transferable to that kind of context. Where there will be perhaps more opportunity for those more highly qualified and skilled workers—and I'm talking more about technicians and electrical engineers and mechanical engineers, or mechatronics if they combine them—they, I would think, would be more transferable in terms of the technical skills profile to move into something like the Celtic free port and what, I understand, are the various areas it's looking to grow economic activity.

Thank you very much. Vera, anything to add there?

Yes. So, I'm not repeating what Dean has been saying, but to add: I think it would be really important to look at the regional labour market and what skills are needed for the green economy. And if you think of your renewables, retrofit, circular economy repair, these are all areas that will grow, and it's important to ensure that there is retraining possible. And some of the fears that workers often have is that some of those jobs are not as highly paid as in the steel industry, and I wanted to share an idea with you that I was having when I was thinking about the current wave of restructuring. Why could we not give incentives to workers to do these sectoral switches and shifts and, while they get their pay—and, I mean, one thing would be through collective agreements, trying to get better pay, but if they don't, that the Government steps in for a period of time that needs to be defined with a kind of transformational wage top-up so that people, workers who are ready to make the shift, would switch to sectors where they earn less—that there is a kind of compensational transition pay, so to speak. And that cost would definitely be lower than all the kind of economic and social costs in the long run if those people lose their jobs.

Thank you. And then in terms of if EAF steel making does come to Port Talbot, the skills required by the workforce—are they skills that are easily transferable from what is at the Tata site in the workforce at the moment over to EAF, or is there development that needs to be done in the skill sets there?

I'm happy to start on that. My understanding is that, yes, for the most part, the skills profile of production workers would—. Everyone is going to require some upskilling and retraining within the context of a new production process, but they're largely transferable, I would say. There are also opportunities, I would think, for new skill sets. You're going to lose a whole skill set with regard to the heavy end, if that was to go completely. We were talking a lot about scrap earlier. I think there's going to be a need for upskilling with regard to the processing of scrap within the plants. The electric arc furnace sites that I visited, in terms of where their efforts are located with regard to scrap and its processing—it's in the delivery of scrap. And there are new technologies for that as well: I-Scrap, for example, that is—. Because you get your delivery of scrap and you need to make sure what you're getting is what you've paid for, and that is an important process that requires data analysis skills, and there are new technologies to help with that, and, of course, you need training on those technologies. There's also the cleaning of the scrap, there's also the storage of the scrap, and it has to be very carefully stored into particular grades. But also, when you're loading the cradle, to get the kind of melt that you want, you need to layer the scrap in a particular kind of order, in a particular kind of way, otherwise, you risk (1) having to do more melts than you would otherwise like to, which is, of course, more energy intensive, and also you might not quite get the product that you planned, and then you're not meeting what the customer requirements are, so there needs to be training in that respect. What's the other thing I was going to say? It's slipped my mind.

Don't worry, Dean. No problem. Have a think, and I'll pop over to Vera and ask her, and then if it comes back to you, Dean, we'll come back to you. Vera.

Okay.

Yes, not much to add. I think, given the fact that, overall, the electric furnace production needs fewer workers, the chances of job creation will really depend on the business success of Tata operations. That would be speculative at this point. So, yes.

Okay, thank you. Has it come back to you, Dean?

I think it was just around new technologies. As I mentioned earlier, I've been working on a project that is looking at optimising the scrap mix for melts, and that in itself requires some new skills in terms of upskilling people to use the kinds of platforms. There are other new technologies, new innovations with regard to scrap. I mentioned I-Scrap, and that is used for the identification of the scrap once it's delivered and that you're getting the scrap you paid for. But also what I think is going to be required is more understanding of the scrap market. When I've visited these plants—. They've had to react very quickly, because sometimes they have an order, and they don't have the scrap, and they have to move on and they have to do something else instead and react very quickly to a different customer's demand, and do the melt for that. So, there's a lot of predicting about what's going to be available, negotiations with scrap providers, and it tends to be, as far as I understand it, the scrap providers that have the upper hand in the market.

Thank you. We're pushed for time, so—

Okay.

Yes, okay. Thank you.

Thank you, Sam. Yes, I'm afraid time has beaten us, but thank you both for being with us today. Your evidence will be very important to us in scrutinising the steel industry going forward, so thank you very much. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but once again, thank you for being with us.

Thank you very much.

Thank you. Happy to.

Fe symudwn ni ymlaen nawr i eitem 6, a dwi'n cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod. A yw'r Aelodau i gyd yn fodlon? Ydw, dwi'n gweld bod yr Aelodau i gyd yn fodlon, felly derbynnir y cynnig, ac fe symudwn ni i'n sesiwn preifat ni.