Tata Steel UK’s parent company, Tata Steel India, has approached the UK government to potentially part-nationalize its struggling Port Talbot steelworks in south Wales.
According to media reports on July 25, Tata Steel is understood to have offered up to a 50pc equity stake in its UK operations for approximately £900bn ($1.16bn) under the UK government’s Project Birch, while it would write-off a similar amount of debt.
Under the scheme, the government has so far only extended a loan of £30mn to Celsa Steel UK with UK Chancellor of the Exchequer Rishi Sunak stating he will set an “exceptionally high” bar for companies seeking taxpayer-funded bailouts during the COVID-19 pandemic.
Early last week a Tata Steel Europe spokesperson announced the company was in “active discussions with the UK government,” to explore several options for its UK operations, including “potential co-operation and participation…to create a sustainable decarbonized footprint.”
Moreover, the spokesperson noted that the company’s UK operations are facing structural challenges owing to the pandemic and a decision to address these issues is still pending though discussions on with the UK government have been constructive.
Tata Steel’s recent comments regarding decarbonization caused concern among UK trade unions who expressed alarm at the possibility of converting Port Talbot into an electric arc furnace-based steelworks. The potential conversion could have negative implications for its 3,500 workers.
The UK Chancellor has indicated that taking large equity stakes would be an undesirable outcome, although the precedent set by bankrolling insolvent British Steel and saving thousands of jobs maybe too much to ignore.
Tata Steel UK operates two blast furnaces at its integrated Port Talbot steelworks, which have the capacity to produce 5mn mt of crude steel. The furnaces can also manufacture slabs, hot rolled, cold rolled and galvanized coil.