6. Statement by the Minister for Economy: The Future of the Steel Industry

Part of the debate – in the Senedd at 5:26 pm on 6 July 2021.

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Photo of Vaughan Gething Vaughan Gething Labour 5:26, 6 July 2021

Thank you for the questions. I'll deal with R&D not just in the steel sector but more generally, and this is one of the challenges overall for our economic future, because when it comes to the distribution of innovation and R&D funding, Wales doesn't actually, I think, secure a fair share of UK-wide funds at present. Actually, Scotland does better than its share at present, in population. That is one of my priorities, to change the way that works. And again, if the levelling-up agenda is to be made real, this is an area where the UK Government could actually do something about that. It's not as if we're asking the UK Government to invest in a part of the UK where there isn't the ability to make good use of that innovation and R&D funding. 

But Swansea is a good example of where that's already working. As I mentioned in my statement, the work that they're doing, alongside Warwick and others, is the SUSTAIN project. That's what I was referring to. And so it does show that there's more that can be done with the real expertise that exists around the industry here in Wales. So, I do want to see more R&D spend taking place in Wales, and there are collaborations where that already works and could be invested in further. And that will be really important not just for the points you make around recycling.

It's one of the things I have definitely discussed with the sector already. It has been raised by them in the individual meetings I've had with a variety of actors as well as collectively around the Steel Council, and we have a challenge—an honest challenge—across the UK that actually we are still exporting scrap at present. We're a net exporter. And that in itself, if we're looking at a greater use of electric furnaces—we've got to think about where the scrap comes from, to see it as a raw material, the quality of it. Now, at present, I don't think you could say to an exporting business, 'Out of the goodness of your heart, you should stop operating.' There's got to be some thought given to how to incentivise the route that currently leads to export leading to those goods being retained here for use within the UK as well as then making sure that we have high-quality materials for use within the sector itself as well.

That is part of what we're looking to address, and this is actually about the expertise that exists within the sector, about how we can do that. And it comes back to the point that I want to make about your point about whether there's a plan, whether we want to produce a strategy. Actually, on decarbonisation and a just transition, the two go together, because you could decarbonise steel production in a way that would cost lots of jobs very quickly, not just directly within the sector, but jobs that are reliant on it. And this is a particular issue for David Rees's constituency, with Port Talbot. And actually the challenge there is you can have a just transition that gives the time to think about how the technology is developed, and that then means you can actually retain lots of high-quality jobs but also the wider value that producing steel from the start actually gives you. Now, that does mean we need to think about what a just transition looks like, for workers and for the wider country as well. We'll need to understand what the broad plan for the industry is so that there is a plan to invest in and around, and that will lead to practical discussions between ourselves and the UK about the different levers and budgets we have to do just that. 

On your point about community energy, I'm sure that Julie James will have lots to say about the role community energy can have and the returns that can be made to those individual communities, as well as providing material additional amounts into the grid. And I'll just deal with, I think, your final point in everything that you've covered, and that is about energy prices. This has been a regular point of concern, and Members who have been here for some time will have heard previous First Ministers talk at length about the challenge that the steel sector has in the UK when there are much higher prices for energy to be paid by UK steel producers, compared to the main competitors in Germany and France, where it's on average 86 per cent more than in Germany and 62 per cent more than in France. So, those current prices are a real barrier to investment and it's only the UK Government that can unlock that and that is a direct challenge that's been made to the UK Government, not just by this Government but by people on all sides of the sector, and it's an issue we'll keep on having to come back to and to return to at each Steel Council, because that potentially puts off investment in the sector and the significant commitment that is needed to move to a genuinely zero-carbon future for the steel industry.