Tata could turn Port Talbot steelworks into a green steel operation

Tata Steel is exploring turning its loss-making Port Talbot steelworks into a recycled steel operation, with unions fearing such a move could put a significant number of jobs at risk. It comes as Indian-owned Tata Steel UK continues discussions over a bespoke loan, understood to be in the region of GBP500m, with the UK Government to support its UK operations where it employs 7,000 in Wales and 4,000 at its primary steelmaking plant in Port Talbot. Funding, under the Treasury’s so called Project Birch initiative, is conditional on the steelmaker reducing carbon emissions and supporting the UK Government’s target of the economy achieving a net zero emissions target by 2050.

Project Birch was initiated to back major employers in the UK deemed of national strategic importance and unable to access the  UK Government’s mainstream Covid-19 loans schemes. Arc furnaces while energy intensive, generate far less emissions than those produced from primary steel making plants. With advances in technology the quality of steel produced by arc furnaces is expected to further improve.

However, an investment in electric arc furnaces, that would recycle steel rather than making it from scratch with the need for raw materials such as iron ore and coking coal, would likely require far less staff. Any funding from the UK Government could have an option for debt to be converted into an equity stake for the government. While Tata insists that no decisions have been made, and a number of options are being considered for Port Talbot to make it sustainable and reduce emissions.

According to the Sunday Times the arc furnaces could take two years to build, starting in 2025. Tata said: “We are in active discussions with the UK Government on several options for the Port Talbot operation to create a sustainable, decarbonised footprint for the future. Given prevailing market conditions and disruption caused by the Covid-19 pandemic, it is clear that the current Port Talbot operation faces structural challenges that need to be urgently addressed.

“Discussions with the government are constructive and ongoing, and at this stage no decision has been made.”

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Steelworkers’ union, Community, said it was seeking urgently clarity from Tata on any plans to convert Port Talbot in a recycled steel plant. In a statement the union said: “If this report is accurate then this plan has been developed without any consultation with the workforce, which is an absolute disgrace. We are seeking urgent clarification from Tata — but rest assured, the unions will not accept the end of blast furnace production at Port Talbot, which would leave the UK unable to make a range of specialist steels.

“Steel production accounts for half the jobs at Port Talbot and this plan would devastate the town and the community. If necessary we will be prepared to fight to protect our members’ livelihood and the future of our industry.” Spanish-owned recycled steelmaker Celsa last month secured a GBP30m loan from the UK Government under Project Birch alongside more than GBP3m in loan and grant support from the Welsh Government.

It was the first company to secure backing from Project Birch. Celsa employs 800 at its mill in Cardiff. Earlier this month steel magnate Sanjeev Gupta, who is executive chairman of Liberty Steel Group, said he would consider an acquisition if the Port Talbot steelworks was brought to market.

Liberty Steel, part of the GFG Alliance owned by the Gupta family, was one of a number of bidders for Tata’s UK steel business back in 2016, before the sales process was abandoned. Initially Mr Gupta’ bid was based on transforming the Port Talbot plant into an electric arc furnace operation. Tata then pursued a joint venture of its European steel business with German conglomerate Thyssenkrupp, before that was dissolved last year.

Mr Gupta, who lives in Monmouthshire, said of the Tata’s UK business: “If we are offered, we are ready to look at it. We have a strong relationship with the Tata Group and are ready to explore any kind of partnership with them. The question is of Tata’s drive.

I am always ready.”

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