Green steel Plan for £2bn low-carbon plant raises 'white elephant' fears

The ironworks in Saudi Arabia's coastal city of Dammam has had an unusual journey: it has crossed the Atlantic Ocean - twice. It was moved to Saudi Arabia in 2006 from Alabama, US. Before that, it's home was in Britain.

- Jasper Jolly

The plant can produce about 1m tonnes a year of direct reduced iron (DRI), a material that can be used in green steel production. Decades after the plant left Britain - shipped in 28,000 pieces - ministers are considering reversing course to fund a similar facility once again.

However, the government's DRI ambition is controversial within the British steel sector; the lobby group UK Steel told the Guardian that a DRI plant was not its priority. Senior industry insiders said they were concerned hundreds of millions in taxpayer money may be spent on a "white elephant".

The government last month recalled parliament to pass emergency legislation to take control of British Steel's two blast furnaces at Scunthorpe, amid concerns that its Chinese owner, Jingye, was days away from closing it. The business secretary, Jonathan Reynolds, and industry minister Sarah Jones said the takeover in effect was necessary to preserve Britain's ability to produce "virgin" or primary steel from iron ore.

The Scunthorpe blast furnaces are the last two operating in Britain. Despite receiving materials for several months they are running out of time, and ministers hope to find a way of retaining primary steel-making abilities. Blast furnaces use the carbon in coal to strip oxygen from iron ore.

That process eventually results in carbon dioxide being vented into the atmosphere, where it heats the globe. Many steel firms are switching to cleaner electric arc furnaces, which use electricity to melt down scrap steel. However, these cannot produce iron from iron ore.