Steel Bailouts: Political Folly or Strategic Necessity?

I would like to start by stating that I have no working experience of the steel industry.  It is not an industry that I have had any direct contact with, nor have I any vested interests in Steel manufacture. 

My first “experience” with the steel industry was during the last major Australian construction project I worked on during the mid-to-late 1990s.

I recall being curious as to why the main structural steel for this project was being imported from Germany, rather than more locally sourced from an Australian manufacturer. 

It is hard to understand how it was less costly in the mid-to-late 1990s to import main steel members from a manufacturer/supplier in Germany, than it was from a more local, Australian steel producer given the abundance of Iron ore and cheap coal available in Australia.  

Why Are Governments Still Funding Steel?

Like recent financial backing of the UK Steel industry by UK Prime Minister Sir Keir Starmer, current Australian PM Anthony Albanese and his Australian Labour Government is backing Australian steelmakers and manufacturers (now and into the future) with a Aus$500 million investment through the Future Made in Australia Innovation Fund.

The question to both Keir Starmer and Anthony Albanese is why back a failed industry at great cost to the taxpayer? This has been tried before and has failed before.  The Australian government appears to be looking to further pump in up to Aus$1 billion of taxpayers monies via the Green Iron Investment Fund, which aims to establish Australia as a global leader in green iron production.

The fund will support the development of a low-carbon steel industry and provide funding for new projects  (Reference: Australian government announces Aus$1 billion fund to support low-carbon steel production-Yieh Corp Steel News). 

Whilst I applaud any meaningful programme to transition over to more sustainable industrial practices, here I would question whether both the UK and Australian governments are putting too many (taxpayer funded) eggs in the wrong basket? 

Aus$1 billion is an awful lot of eggs to be putting into a basket where the bottom fell out some time ago. Seemingly, the current UK Labour government is following suit with their antipodean comrades.

I believe that it was Mark Twain who was quoted as saying “Reader, suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.” Perhaps, that rings true for these current Labour/Labor governments?

Is Steel Still Strategically Important?

Even if Australia completes this transition, and China and India don’t, then globally it will be insignificant with respects to climate change.  Australian-made steel will STILL be financially uncompetitive and will STILL be dwarfed in production by coal fired Chinese Steel (as it is currently). 

There isn’t a global steel producer not dwarfed by Chinese steel production. The combined production from the next biggest steel producers to China of India, Japan, USA, Russia, and Korea combined are still less than 50% of Chinese steel production. 

To put this into perspective, Australian throughout the early 2020s exported circa 700 million tons of Iron Ore to China per year, whilst producing circa 5 million tonnes of steel themselves.  

Australia Imports from China of Articles of iron or steel was US$3.34 billion during 2024 ( Australia Imports from China of Articles of iron or steel – 2025 Data 2026 Forecast 1988-2024 Historical).  It is also of note that In 2023, China imported around US$6.36 billion  worth of coal from Australia (China: coal imports from Australia 2023 | Statista)

Is it not the height of hypocrisy and stupidity for the Australia government to pump hundreds of millions of taxpayers money to “Green wash” its own uncompetitive and uneconomical steel industry, whilst importing vast amounts of steel from China that is itself made from significant amounts of Australian ore and coal exports from Australia to China? 

Would not these billions be better spent helping transition China and India’s massive steel manufacturing capacity “to green” rather than tipping a thimble full of fresh water into the ocean and expecting it not to be salty?  

Green Steel: Viable or Expensive Illusion?

Herein is the main problem with the environmental lobby in that it has helped drive production and manufacturing in liberal democracies to the wall, whilst “conveniently” ignoring the massive environmental costs of “low cost” manufacturing and production in socialist countries such as China, Russia, and India. 

One could ask if it is simply a coincidence that most Green Parties and Environmental lobby groups are underpinned by socialist ideology, yet don’t have any meaningful presence in any actual socialist countries?

Does that not simply highlight who the organ grinder is, and who is the monkey on the end of the chain?

Should anyone wish to challenge such a view, then I’d direct them to the widely reported statement that Europe is estimated to have bought €22 billion of fossil fuels from Russia in 2024 but gave €19 billion to support Kyiv” (As referenced in the Guardian article of 24 FEB 2025: EU spends more on Russian oil and gas than financial aid to Ukraine – report | Russia | The Guardian). 

Is anyone “Protesting” to “Stop Russian Oil Imports.”  No, no one is; not even Greta.  Add to this that India imported nearly 1.8 million barrels per day (bpd) of crude oil from Russia in May (Reference: India’s Oil Imports From Russia on Track for 10-Month High | OilPrice.com), then this hypocrisy is laid bare. 

Russia does not have a strong record when it comes to “Environmental responsibility” in relation to oil and gas production; neither do India, Russia or China when it comes to steel production fuelled from this same oil and/or Australian Coal!  

We see little to no “Climate Change” protests in these countries, and no one is throwing orange colourant upon the walls of the Kremlin in Russia, nor The Great Hall of the People in China (not that I am suggesting that anyone does, or even tries to do this).

With the threat of the blast furnaces at British Steel’s facility at Scunthorpe running out of raw materials within days looming, the British Labour government sprang into action with hundreds of millions of pounds of taxpayers monies, and is considering nationalising British Steel (Reference: Nationalisation an option for British Steel, says government). 

Is this out of a genuine concern for “British Interests,” or simply pandering to the very trade unions that financially underpin the British Labour party?  Like Australia, UK steel production is not significant when compared against global production. 

Also, like the Australian steel industry, it is heavily unionised and uncompetitive against the major global steel producers of China, India, Russia, Japan, and the USA.

China’s Steel Dominance and Global Oversupply

With the collapse of Chinese property developer and construction juggernaut Evergrande Group, and the resultant consequence of a massive surplus of structural steel (As noted in my September 2024 PII article “A Looming Economic Storm: The Global Impact of China’s Crisis and Western Uncertainty”); now is not the time to throw good money after bad into Steel manufacturing. 

It gets worse when considering that 2025 has seen a massive over-supply of below cost steel dumped upon the global market.

Reference: Steel – Price – Chart – Historical Data – News

Reference: 1: Yearly global crude steel production from 1900 to 2019 [1-5]. | Download Scientific Diagram

Are Trade Unions Driving Political Bailouts?

Wasting taxpayers money in propping up a failing (failed) Steel industry seems folly, and it is a fair question to ask the current UK Labour party as to what criteria needs to be present with respects to which (formally private) companies it is prepared to throw taxpayer monies at to keep afloat.  

Is Trade Union membership a factor, or is this politician’s vested interests that weigh the decision? It certainly doesn’t seem on balance to be in the interests of the UK taxpayer.

It is worth considering that the last time a UK Labour party underpinned private companies with a massive injection of public monies was the banking crash of 2008/09! (Bank reforms: how much did we bail them out and how much do they still owe? | News | theguardian.com). 

It is debatable as to how much value taxpayers received from all this money that was thrown into the banking system.  I would question anyone reading this article to show that the government support to the private banking sector provided “value for money” for the UK taxpayer, and to find anyone held accountable for causing the financial meltdown. 

For those up to that particular challenge, I would recommend starting with the September 2018 article in the Guardian (Reference: Those who caused the financial crisis still haven’t been held to account | Letters | The Guardian) that claims that as of 2018 “no senior executives charged (only lower-level employees) and no bank successfully prosecuted. Just in May this year, a judge dismissed charges in the only prosecution ever brought against a bank for financial-crisis wrongdoing.” 

With respects to British steel production and those private companies doing it, seemingly history is repeating itself.  Whilst I am not claiming any wrongdoing; I do expect that the usual lack of accountability will be as stark as it was, and still is, within the banking sector in relation to the financial melt-down of 2008/2009. 

After all these hundreds of millions of pounds of public monies have been pumped in to British steel production, I suspect that it will find itself in the same place that it is right now, and it will remain uncompetitive and uneconomical.  

For an incoming government claiming to have inherited a UK£22 billion black hole (Is there a £22bn ‘black hole’ in the UK’s public finances?), they seem awfully keen on digging it deeper.  That is not good government, nor is it responsible government.  

Whilst I understand that nationalising a country’s infrastructure and industry aligns with the socialist ideology so prevalent within the UK Labour party (and the Australian Labor Party), I would have concerns that a government lacking any senior ministers with industry/business experience are the ones considering doing it (As referenced in the Sunday Times Article of December 2023: Business charm offensive ‘masks Labour’s lack of experience’).  It is worth considering the line in this same Sunday Times article that states:

Analysis of Labour’s prospective parliamentary candidates by Apella Advisors, a strategic communications and public affairs consultancy, has laid bare the lack of business experience among those most likely to be elected as new MPs.

Lessons from Past Nationalisation Failures

A run through the current UK Labour front bench shows an astonishing lack of ministers with any background in industry, science, and/or engineering beyond being Trade Union representatives. 

Given the government isn’t considering handing over the British Steel industry to the very unions so active within the Steel industry (and it’s demise), then I’d question whether anyone in the current UK Labor government front bench has a suitable skillset or knowledge for overseeing nationalisation of any commercial business or industry. 

In any case, a look into post war Britain reveals that the Labour party of the time did undertake a programme of nationalisation (As referenced in the BBC Bitesize article: Nationalisation of the key industries – Rebuilding the country after 1945 – WJEC – GCSE History Revision – WJEC – BBC Bitesize). 

Here, the UK Labour party’s reasons for Nationalisation were:

• to increase efficiency in the key industries and help modernise them
• to lower prices and lead to more jobs
• to further the status of workers and improve working conditions
• to put workers and consumers before profit

Should Green Investment Be Redirected Elsewhere?

Given the industries nationalised included Coal, Railways, Iron and Steel and Electricity, then for the most, these above four points were not achieved and only served to pour public monies into declining industries that are now either no longer with us, are in non-UK ownership, or are a complete shamble. 

I would suggest that the current UK government looks at the National Archives and the Iron and Steel Act that was passed in 1949 and (rightfully) repealed in 1953.

This 1949 Act brought 94 iron and steel companies into public ownership at a huge cost to public finances (Reference: Records of the Iron and Steel Corporation of Great Britain, the Iron and Steel Board, and related bodies | The National Archives). 

Given the UK steel industry has been through a revolving door of ownership and in constant decline since this time (As duly noted in the 2016 The Guardian article “Steel in the UK: a timeline of decline” (Reference: Steel in the UK: a timeline of decline | Steel industry | The Guardian)), then perhaps this really is a ship long since sailed?

If global Steel manufacturing specialists such as India’s Tata Steel and Chinese company Jingye Group can’t make a go of it, then how does a UK Labour party collective that is lacking any industrial/business experience and/or knowledge of the Steel industry (beyond the Trade Unions so prevalent within it) expect to?  

Perhaps now is the very time to hand this industry over to the very Trade Unions so central within the Steel Industry? If only they would accept ownership and the responsibility that goes with it.  No, they probably won’t… and neither should any sitting government!

FAQ's: Steel Bailouts

Why are governments still bailing out the steel industry?
Steel is seen as a strategically important industry. Governments argue that national security, job retention and industrial sovereignty justify bailouts—even if the industry is globally uncompetitive.

What is green steel and how does it differ from traditional steel?
Green steel is produced using low-carbon processes such as hydrogen instead of coal-fired blast furnaces. It's less polluting but more expensive and not yet scalable.

How much public money is being spent on steel bailouts?
The UK and Australian governments have committed hundreds of millions each—UK's British Steel rescue and Australia’s AU$1 billion Green Iron Investment Fund are recent examples.

Can green steel make domestic producers competitive again?
It’s unlikely in the near term. The cost gap versus coal-based steel (especially from China and India) remains wide, and demand for green steel is still limited.

Why isn’t there more protest over environmentally damaging steel imports?
While domestic industries face environmental scrutiny, less attention is given to the carbon footprint of imports—exposing a gap in global environmental activism.

Has nationalisation of steel worked in the past?
No. Post-WWII nationalisation of UK steel failed to modernise the industry, and it was repealed in 1953. The sector has since been marked by decline and poor competitiveness.

Are trade unions influencing these bailouts?
Trade unions have historically had strong influence in steel-heavy regions. Critics argue that political motivations, not industrial logic, are behind recent bailouts.

Should public funds be used to transition Chinese and Indian steelmakers?
This is a controversial proposal, but some argue that helping the biggest polluters go green would have a far greater climate impact than propping up minor local producers.