Tata Steel UK may cut 1,200 jobs

With average cost per employee at $ 80,000, job cuts could lead to some savings for the producer, say analysts

Tata Steel may cut 1,200 jobs at its UK long products division as the company proposes to stop making steel plates.

“The proposed changes will lead to around 900 job losses at the Scunthorpe mill and 270 in Scotland along with a small number at other long products sites,” Tata Steel said in a release on Tuesday.

“Plate mills in Scunthorpe, Dalzell and Clydebridge will be mothballed while one of the two coke ovens at the Scunthorpe steelworks will be closed,” it added.

Cheap Chinese imports, a strong pound and high power costs had forced the move, Tata Steel pointed out. Europe’s steel plate imports have doubled in the past two years and imports from China have quadrupled.

A stronger pound has undermined the competitiveness of Tata Steel’s Europe-bound exports. The company today began consultation with its UK unit employees and their trade union representatives, the release added.

“We will work closely with the affected employees and their trade union representatives. We will redeploy employees, wherever possible, and minimise employee hardship,” the release quoted Karl Koehler, chief executive at Tata Steel’s European operations, as saying.

Tata Steel's European operations will concentrate on stronger and lighter products for its customers.

“Today’s proposals mark the next step in reshaping our business to give it the best chance of survival in this fiercely competitive global marketplace. We are looking at the performance of all long products as we focus on returning to profitability,” the release quoted Bimlendra Jha, executive chairman of the standalone long products Europe business as saying. Brokerages said Tata Steel’s move to exit long products made sense because commodity-grade steel business was becoming unviable.

“The company will focus on differentiated products that fetch higher realisations. The move is in the right direction, but we cannot comment on the return of profitability,” said Pritesh Jani, senior analyst with Religare Securities. Tata Steel’s average cost per employee in the UK was $80,000 and 1,200 jobs cut could lead to significant savings for the company, analysts said.