The nationalization comes after parliament on Wednesday passed a bill allowing the government to put the steel industry into public ownership, provided it meets a public interest test.
Jingye is demanding compensation after previously saying the company was losing £700,000 a day. The BBC has not received a response from Jingye itself regarding Thursday’s announcement.
Small Business Minister Blair McDougall told the House of Commons on Thursday that the government would “appoint an independent valuer to make a judgment on compensation this autumn”.
By bringing British Steel into public ownership, the government now has the power and freedom to decide the future of the plant while keeping the blast furnaces running.
It costs over a million pounds a day, so it’s unlikely the government will want to keep the business running in the long term.
In March, the National Audit Office revealed that Scunthorpe steelworks was costing the government around £1.3 million a day.
Economy Secretary Peter Kyle told the BBC the government would need to cover operating costs “for the immediate future”.
The steelworks directly employs around 2,700 people in Scunthorpe and supports thousands of additional jobs in its supply chain.
The UK imports most of its steel from major suppliers including the European Union, the United States, China and India.
If the plant were to stop producing pure steel, Britain would be the only member of the G7 group of major economies without production capacity.
Steel production elsewhere in the UK relies on electric arc furnaces (EAFs), which recycle scrap metal into new products.
The government’s long-term strategy is to have all steel produced domestically come from EAF, which is cheaper and much less carbon-intensive, but it does not want to lose production at Scunthorpe just yet.
The plant produces a type of steel not yet produced anywhere else in the country, much of which is needed for the Network Rail and building industries.
There were fears that losing this production would be devastating and make the country too dependent on imports. So it was decided to keep Scunthorpe open until an alternative came along.
British Steel was last owned by the state in 1988 when it was privatized by Prime Minister Margaret Thatcher’s government.
