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In July 2022, Tata Group Chairman Natarajan Chandrasekaran told the Financial Times that transition to green steelmaking hinged on the British government’s support. Talks had been going on for two years, and the writing was on the wall: Without a deal within the next 12 months, the plant, Port Talbot, would close down.
Port Talbot, Tata Steel’s upstream steelmaking facility in South Wales, had largely been a drag on the company’s bottom line since it acquired Anglo-Dutch steelmaker Corus in 2007. Government support was crucial as cash flows from the business fell short of funding the capital-intensive transition.
Cut to July 14, 2025. An impassioned Chandrasekaran, while flagging off the construction of the electric arc furnace (EAF) at the plant, spoke of the ups and downs the site had faced. “Many people, many naysayers probably thought that this day would not come. And that’s why it’s important,” he said. “We got a job in hand, we got to execute. We are super committed to this project. That’s why I wanted to be here today to show my personal and the Tata group’s commitment.”
The speech — brief — brimmed with optimism.
Meltdown to makeover
The EAF at Port Talbot brings the curtains down on carbon-intensive blast furnace (BF) steelmaking at the site and paves the way for low-carbon steel production.
The heavy-end assets were at the end of life and carbon costs on the blast furnace process were high. The transformation, however, impacts close to 2,500 jobs, even as it secures 5,000.
The BFs were decommissioned by the end of September 2024, a first on such a scale in the history of the company.
Last week, as construction of the EAF kicked off, the steelworkers’ union described it as a “bittersweet” day. While it looked at it as a consequence of the devastating closure of the blast furnaces, it also acknowledged that a future for Port Talbot steelmaking was now secured.
Getting to this point wasn’t easy. From securing union support to navigating government negotiations, it was a web of complex stakeholder management.
Years in the making
The transformation to low-carbon steelmaking involves an investment of £1.25 billion. The UK government is backing the project with £500 million — the funding came through after a stretch of political churn in Westminster.
Discussions for the support began under Prime Minister Boris Johnson. Till the time the deal was signed and sealed, the UK had cycled through another three prime ministers.
In September 2023, Tata Steel and the Rishi Sunak-led Conservative UK government had agreed on a grant of £500 million. But in the July 2024 general elections, the Labour party landed a historic win, putting a question mark on the funding and the future of Port Talbot.
Things, however, worked out, and the Keir Starmer-led Labour government signed the Grant Funding Agreement in September 2024.
The lifeline
When Tata Steel acquired Corus in a £6.2 billion deal in 2007, it gained two key steelmaking sites: Port Talbot and IJmuiden in the Netherlands. The latter has been largely self-sustaining, whereas the structurally weak UK operations demanded substantial capital.
Tata Steel disclosed in January 2024 that since the Corus acquisition, it had put in £6.8 billion in the UK towards improving steelmaking operations and processing sites, covering financial losses, pension restructuring costs, and providing additional capital support to service Tata Steel UK’s share of debt.
The closure of heavy-end assets at Port Talbot is expected to bring down the losses. The 3.2 million tonne (mt) EAF will be commissioned by the end of 2027. Downstream customers are currently being serviced with slabs from India, the Netherlands, and even the open market, reducing fixed cost.
Arresting the drain
The task before Tata Steel’s management is clear, and the goal firmly defined.
At its annual general meeting on July 2, Chandrasekaran told shareholders that the company was working towards becoming profit after tax (PAT)-positive. “Losses in the UK will be wiped out. And going forward, this year or the next, it will become PAT-positive,” he said.
The first step, however, could be to make it positive or neutral in terms of earnings before interest, tax, depreciation, and amortisation (Ebitda) this year. In FY25, UK Ebitda loss stood at £385 million.
In a credit rating report dated June, Icra noted: “Within the European operations, the UK assets were a weak link in terms of their cost position.” However, the EAF transformation will significantly improve the cost position of the UK asset and will, hence, arrest the drain in the company’s consolidated earnings, it said.
“The UK operations have cost Tata Steel a lot over the years — in terms of management bandwidth and financial capital,” said Tushar Chaudhuri, research analyst, PL Capital (Prabhudas Lilladher). “The leakage to earnings in the UK that impacted Tata Steel’s consolidated balance-sheet should now stop. And the Netherlands operations are expected to perform much better this year, post the relining of the blast furnace. Over the next two quarters, Tata Steel’s European operations should be Ebitda-positive.” Dutch support
In the UK, Tata Steel is already on the road to decarbonisation. In the Netherlands, the plans are still in motion.
The plan for the Dutch operations is to replace one of the two blast furnaces and coke ovens with direct reduced iron and EAF-based production by the end of the decade.
Discussions with the Dutch government for financial and policy-level support on the decarbonisation plan have been going on. Clarity is expected this year.
Meanwhile, external vulnerability has prompted Tata Steel to review costs across regions as part of a transformation programme: A multi-pronged approach of maximising production efficiencies, lowering fixed costs, and optimising product mix and margins.
In the Netherlands, Tata Steel plans to cut 1,200 jobs in phases as part of this exercise. But the cost-cutting drive is not just limited to the high-cost European outposts.
Forging ahead
Over the next 12 to 18 months, Tata Steel has set a cost takeout target of ₹11,500 crore across regions: India, the UK, and the Netherlands. In FY25, the cost takeout had stood at ₹6,600 crore versus FY24 levels across units.
Rising geopolitical tensions, volatile steel prices, and impending auction of legacy iron ore mines in 2030 are among the challenges that are largely beyond Tata Steel’s control. So it is focusing on what it can control — resetting its cost structure.
A sector expert pointed out: “Tata Steel may bid for the mines when they come up for renewal, but costs will go up. It needs to prepare for life beyond 2030.”
On the cost takeout, Amit Lahoti, senior research analyst — Institutional Equities at Emkay Global, however, said, “It is difficult to assess how much of the cost takeout will ultimately flow to the Ebitda. There are too many moving parts, such as steel prices and market conditions.”
The company will also benefit from the expanded 5 mt capacity at Kalinganagar, Odisha, adding to its top and bottom line – with some of the additional volumes flowing in FY26.
As things stand, the years of struggle with European business appear to be fading, new capacity is set to generate cash, and efforts to rein in expenses are gaining momentum. Could this be a new chapter in the century-old steelmakers’ story?
