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Tata Steel flags concerns over political slugfest ahead of UK's elections

The statement follows UK media reports on Labour urging the company to pause the restructuring process until next month's general election

Tata Steel

The statement follows UK media reports on Labour urging the company to pause the restructuring process until next month’s general election.

Ishita Ayan Dutt Kolkata
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.
Seeing red over green
2023
 
September: Tata Steel and the UK government agree on a £1.25 billion proposal inclusive of a £500 million grant from the UK government for EAF steelmaking at the Port Talbot site; announcement raises concerns from unions over redundancies
 
2024
 
January: Tata Steel rejects union plan for maintaining a single blast furnace after detailed discussions, indicates potential impact on 2,800 jobs
 
March: Tata Steel UK ceases operations of coke ovens at Port Talbot plant

May: Wales’ First Minister Vaughan Gething, meets Tata Steel management in Mumbai on restructuring at Port Talbot; unions ballot for industrial action
 
June: Tata Steel expresses concerns over policy differences between the UK government and the Opposition over Port Talbot transformation plan

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First Published: Jun 11 2024 | 2:48 PM IST

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