British Steel’s blight has forced the closure of Scunthorpe’s blast furnace.

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British Steel was forced to shut down one of its two blast furnaces in Scunthorpe last year after it used the wrong coal, a sign of the crisis engulfing the Chinese-owned group’s UK operations.

The clash sparked initial fears by some government officials that British Steel might be trying to sabotage its own loss-making plant, but ministers have since blamed the closure on management error.

It was announced that British Steel had abandoned plans to restore its Teesside steelworks. Government sponsored restructuring The company’s operation to move to green products.

The company, which is owned by China’s Jingji, originally had plans to build one electric arc furnace in Scunthorpe and one in Teesside, but people familiar with the situation have confirmed that the aim is now to build two at the Lincolnshire site.

Lord Ben Houchen, the Conservative mayor of Tee Valley, said the Labor government rejected the proposal and instead helped assemble new British Steel electric arc furnaces at the existing Scunthorpe factory.

“It’s sad,” Houchen told the Financial Times. It was clearly a collusion between the Labor government and the trade unions to prevent it from coming to Teesside.

Business secretary Jonathan Reynolds Partners said the future structure of the business was a business decision for British Steel, but pointed out that Teesside was an attractive location for inward investment.

The company’s decision to scrap plans to build one “green” furnace on Teesside and another at its flagship works in Scunthorpe was first reported by The Sunday Times.

The problem at British Steel’s “Queen Anne” furnace in Scunthorpe arose last year after the company shut down the coke ovens that feed the two furnaces in 2023 and began importing coking coal.

Engineers mistakenly pumped out a mixture of “low-quality and low-quality” coke, which caused the furnace to become inactive, several people familiar with the situation said.

The closures have raised concerns in the government that British Steel may have tried to damage its own plants, as the UK’s insolvent operation was used to justify the closures, people briefed on the matter said.

But one government insider said Reynolds believed it was driven by “inefficiency and cost-cutting” rather than any ulterior motive. The engineers misunderstood the complexity of the company’s demanding blast furnaces, said a second person familiar with the situation.

Discussions between the government and the company regarding the support package are still ongoing. British Steel’s latest accounts, filed last year, showed Genji had injected £100mn of equity into the business by October 2023.

British Steel has made it clear that it wants more than the agreed £500mn to build an electric arc furnace at Tata Steel’s Port Talbot plant in Wales. The government said it would invest £3 billion. including £500mn for Tatato Britain’s steel industry over the next decade.

Union representatives said their priority is to keep the blast furnaces open for as long as possible. Electric arc furnaces are not carbon intensive but employ fewer people and the shift to greener forms of steelmaking could put half of the 4,500-strong workforce at risk.

Alasdair McDiarmid, assistant general secretary of the community union, whose members include steelworkers, said: “It is vital that two blast furnaces remain in Scunthorpe to facilitate the transition to new technologies on site.”

“This is a priority for us as an association and is a core part of our proposals to Genji and we are now awaiting the company’s response.”

British Steel declined to comment on why the Queen Anne furnace went down, but said both furnaces are now operational. He continued to buy “raw materials for the production of iron and steel”.

The company added: “We have ongoing discussions with the government about our decarbonisation plans and the future performance of our UK business.” Although progress continues, “no final decisions have been made,” he said.