Tata in talks to sell UK steel plants to Swiss group Klesch

Tata Steel Ltd is in talks to sell European operations including mills in northern England and Scotland to Geneva-based Klesch Group, as it battles weak prices, squeezed margins and an uncertain outlook.

Tata, Europe's second-largest steel producer, said in a statement on Wednesday it had agreed to discussions with Klesch on its Long Products division, which serves the construction and engineering industries and employs 6,500 people in Britain and Europe.

Long products include bars, rods and wires, structural shapes and rails, and tubes.

Overall, Tata employs 30,500 people in Europe, including 17,500 in Britain.

Under a memorandum of understanding, Tata would sell UK-based assets including Scunthorpe Steelworks, mills in Teesside, Dalzell and Clydenbridge in Scotland, as well as operations in France and Germany, if a final deal is struck.

"We have decided to concentrate our resources mainly on our strip products activities, where we have greater cross-European production and technological synergies," said Karl Koehler, chief executive of Tata Steel's European operations.

Tata Steel moved into Europe less than a decade ago, with its $13 billion acquisition of Britain's Corus in 2007, but has been forced to consistently slash costs and jobs to improve performance and remain competitive.

Producing steel profitably in Britain has become increasingly difficult given shrinking demand, plus higher energy, labour and logistics costs compared even with mainland Europe - itself struggling to compete with Asia and the United States.

Unions, who said they were not consulted, criticised a move which they said threatened Tata's future in Europe.

"The fact that Tata Steel wants to abandon half of its European operations and pull out of an entire strategic market does not bode well for the future and ends Tata Steel's vision to be a global steel player," the National Trade Union Steel Co-ordinating Committee said in a statement.

The committee said Tata Steel chairman Cyrus Mistry had agreed to meet workers.

The Klesch Group is a global industrial commodities business, with three divisions specialising in the production and trading of chemicals, metals and oil.