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Tata Steel flags concerns over political slugfest

In a statement on Tuesday, Tata Steel said, over the last three years, Tata Steel and the UK government have worked hard to develop a sustainable future for Tata Steel UK and the Port Talbot plant…reports Asian Lite News

Expressing concern about policy differences between the UK government and the Opposition on the transformation plan at Port Talbot in Wales, Tata Steel said on Tuesday that it will continue with the announced closure of the heavy-end assets and the restructuring programme in the coming months.

The statement follows UK media reports on the Labour Party urging the company to press the pause button on the restructuring process until next month’s general elections in the country.

Shadow business secretary Jonathan Reynolds called on Port Talbot on Monday and is said to have met the Tata Steel management and trade unions.

Ahead of the visit, Reynolds posted on X: In Wales today to make clear that we can do better than the Tories’ botched deal for Port Talbot steel.

Labour’s Green Prosperity Plan will bring good jobs to every part of the country and getting the transition to green steel right is a key part of that.

In a statement on Tuesday, Tata Steel said, over the last three years, Tata Steel and the UK government have worked hard to develop a sustainable future for Tata Steel UK and the Port Talbot plant.

It added, “We are, therefore, apprehensive reading UK media reports suggesting that the £1.25 billion investment, the largest in many decades in British steelmaking, may be put in peril due to policy differences between the Conservatives and Labour parties, during the ongoing election period.”

“We urge the current and the incoming government post-elections, to adhere to and safeguard the agreed terms of the £500 million package of support for the electric arc furnace (EAF) project announced in September 2023,” the company said.

Tata Steel entered into a deal with the Conservative government last September for a £500 million grant for transition. This would be to replace an emission-intensive blast furnace technology to low carbon steelmaking through the EAF route.

The total investment is £1.25 billion, of which the UK government has committed £500 million and Tata Steel will be investing £750 million.

The restructuring, expected to lead to potential redundancies up to 2,800, met with stiff resistance from trade unions in the UK.

According to reports, Labour has been in favour of the union plan to keep one blast furnace running until the EAF is operational. However, Tata Steel has already started winding down operations of heavy-end assets.

The coke ovens, a critical facility for primary steelmaking, had to be closed in March 2024 as operations became infeasible and unsafe, the company added.

It said, “Therefore, the company is compelled to continue with its plans to decommission blast furnace number 5 at the end of June. This will be followed by decommissioning blast furnace number 4 by September-end.”

The downstream assets will continue to service customers by utilising imported semi-finished steel till the new EAF is built and commissioned.

The company also said the heavy-end assets were operationally unstable, resulting in unsustainable financial losses.

In FY24, UK’s annual revenues were £2,706 million and earnings before interest, taxes, depreciation and amortisation (Ebitda) loss stood at £364 million.

The proposed grant funding from the UK government is ring fenced for building the new EAF. It is critical to secure long-term supply of steel for Tata Steel’s UK downstream assets and protect 5,000 jobs in various Tata Steel UK sites, the company said.

It added, “It is not linked to the ongoing financial losses and the instability of the existing heavy-end assets, whose closure is now underway and immutable.”

“We are concerned with the UK media reports as further political uncertainty on the timing and form of the grant will place the EAF project and the long-term future of steelmaking at Port Talbot at significant risk,” the company added.

ALSO READ-Tata Steel UK may cut 2,500 jobs 

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Tata Steel UK may cut 2,500 jobs 

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India-based Tata Steel owns the UK’s largest steelworks of 3 million tonne per annum (MTPA) at Port Talbot in South Wales and employs around 8,000 people across all its operations in that country…reports Asian Lite News

Tata Steel, a subsidiary of Tata Group, is laying off around 2,500 workers at its UK operations as it transitions greener steelmaking process. The company’s CEO T V Narendran said the loss of the UK site, which is in a transition phase, is “inevitable.” The workers’ unions are, meanwhile, criticising the fear of job cuts and continuously protesting against the company in the UK, as per PTI report.

India-based Tata Steel owns the UK’s largest steelworks of 3 million tonne per annum (MTPA) at Port Talbot in South Wales and employs around 8,000 people across all its operations in that country.

As part of its decarbonisation plan, Tata Steel is transitioning from traditional blast furnace steelmaking route to a more eco-friendly low-emission electric arc furnace (EAF) process. While this reduces carbon emissions by 5 million tonnes annually, it also requires fewer workers.

Narendran said the shift to EAF with UK government aid will make the company competitive in terms of reduced production costs, and also help in reducing 5 million tonnes of Co2 per year.

“But all this involves 2,500 job losses and that is what the unions obviously are not happy with. And that’s a conversation going on with the unions to how we can do it in a smooth as possible way. It is inevitable,” he said.

Earlier in September last year, Tata Steel and the UK government jointly agreed on a proposal to invest in state-of-the-art Electric Arc Furnace steelmaking at the Port Talbot site with a capital cost of £1.25 billion inclusive of a grant from the UK government of up to £500 million to execute decarbonisation plans at Port Talbot steel making facility in Britain.

Giving updates on the UK, Narendran further said the coke ovens were already closed in March. One blast furnace will close in June because it is operationally struggling, and the second blast furnace will close in September for reasons of asset quality as well as for reasons of financial bleed.

“We want to transition to EAF production because the UK has a lot of steel scraps. It is one of the few countries which is a big exporter of steel scraps. So, it makes sense to use scrap available in the UK to make steel in the UK to sell to customers in the UK, as compared to importing iron ore and coal from all over the world,” the Tata Steel UK business CEO said.

“Making steel through EAF process will make Tata Steel competitive by at least USD 150 a tonne. So, the UK business, which has traditionally lost money for the company, can become EBITDA positive and cash neutral once completion of this transition,” he said as quoted by PTI.

The CEO had earlier mentioned that Tata Steel aims to complete decarbonisation journey at its plant in the UK in next three years.

Tata Steel UK annual revenues were 2,706 million pounds and EBITDA loss stood at 364 million pounds. Liquid steel production was 2.99 million tonnes while deliveries stood at 2.80 million tonnes.

For the January-March quarter, revenues were 647 million pounds and EBITDA loss stood at 34 million pounds.

Tata Steel on Wednesday reported a 64.59 per cent decline in its consolidated net profit at Rs 554.56 crore for the January-March quarter of 2023-24 on lower realisations and expenses on certain exceptional items.

The steel major had posted a profit of Rs 1,566.24 crore in the year-ago period.

ALSO READ-Tatas mull exit from UK steel business

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UK govt in advanced talks over £500m Tata Steel aid package

Industry sources close to the discussions said the company had indicated that over the long term, as many as 3,000 of its British-based staff were likely to lose their job…reports Asian Lite News

Whitehall officials and Tata Steel are close to agreeing a deal that would commit more than £1bn to the future of its Port Talbot steelworks, but which could ultimately result in thousands of job losses, Sky News reported.The terms of an agreement were subject to change, but that there were hopes of finalising it as early as this month.One insider suggested that Tata Steel had been trying to persuade the government to increase the proposed funding package in recent weeks, Sky News reported.Under the plans currently envisaged, the government would commit approximately £500m of public funding to the company, while Tata Steel’s Indian parent would sign off £700m of capital expenditure over a multi-year period.Port Talbot employs about 4,000 people – roughly half of Tata Steel’s overall UK workforce of approximately 8,000, Sky News reported.Industry sources close to the discussions said the company had indicated that over the long term, as many as 3,000 of its British-based staff were likely to lose their jobs.

Electric arc furnaces, which Tata Steel would commit to building as part of the agreement with government, utilise different, less labour-intensive, processes to produce steel than traditional blast furnaces.The government is said to have accepted during the discussions that some job losses would be inevitable as part of the transition to reducing carbon emissions, although an insider said on Saturday that a number of those could be through workers taking early retirement, Sky News reported.

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Next UK PM to decide fate of Tata Steel’s demand for subsidy

Both she and her rival, Rishi Sunak have claimed to be Thatcherites who in the 1980s, refused to bail out struggling coal mines and steel production…reports Asian Lite News

The fate of Tata Steel’s UK business has shifted to the next British Prime Minister who has to take a decision on whether to grant a 1.5 billion pounds ($1.8 bn) subsidy to the company or let it shut down.

This was indicated by business secretary Kwasi Kwarteng after Tata chairman N Chandrasekaran warned on Friday that the subsidy to the British steel plant is necessary within the next one year to keep the steel plant in the UK operational or the plant will close down.

Chancellor of the Exchequer Rishi Sunak leaves the Prime Minister Boris Johnson weekly Cabinet Meeting inside No10 Downing Street on his way to deliver his 2021 Budget to the House of Commons. Picture by Andrew Parsons / No 10 Downing Street

The Financial Times reported on Saturday that Kwarteng’s stance is significant because he is tipped to be the next chancellor if foreign secretary Liz Truss becomes premier when a new Tory leader is announced on September 5. Interestingly, Truss has campaigned to reduce the size of the state and cut taxes. Both she and her rival, Rishi Sunak have claimed to be Thatcherites who in the 1980s, refused to bail out struggling coal mines and steel production.

Tata Steel’s UK facility has manufacturing capacity of 5 million tonnes, which employs 8,000 people, while the Netherlands facility has seven million tonnes capacity and employs 9,000 people. The Southeast Asia operations has another 1.7 mt capacity. The UK and the Dutch operations are housed under Tata Steel Netherlands. Tata Steel UK needs the subsidy to reduce carbon emissions at its Port Talbot facility by building electric arc furnaces and closing the two blast furnaces in the UK and stopping primary steel production. Arc furnaces on the other hand recycle steel and are less carbon intensive than the blast furnaces, the FT said.

Analysts at rating firm Moody’s recently said given the lack of vertical integration at Tata Steel’s European operations and the wide swings in the business’ profitability in previous years, they remain cautious in the forecasts and assume that the business’ earnings before interest, taxes, depreciation, and amortisation (EBITDA) per tonne will decline from $180 in fiscal 2022 to around $140 -$150 in fiscal 2023 and further slide to $40 -$50 in fiscal 2024. Also embedded in this assumption is Moody’s view that inflationary pressures and volatile energy costs will likely prolong through the ongoing fiscal year.

Analysts said in the fiscal year ending March 2002, Tata Steel Europe’s operations have witnessed a considerable turnaround with an EBITDA per tonne of Rs 13,741 for the year 2022 (the company had made an EBITDA level loss in previous year). The company had maintained the volume at nine million tonnes as compared to 8.8 MT reported in previous year. This is mainly on account of the strong rebound demand from the European markets and improvement at realisation levels. In the second half of fiscal 2222, deficit in the European steel market on account of China going into second lockdown and declined production by the Chinese players owing to policy restriction was picked up by other players, including Tata Steel Europe which has resulted in the improvement performance at TSE level.

“However, going forward, the performance of TSE will be a key monitorable in terms of the rating perspective,” rating firm Care said early this month.

ALSO READ-Tata Steel threatens to shut British ops