Tata Steel will go ahead with its plan to shut down both its blast furnaces at Port Talbot in the U.K. by September despite concerns that its switchover to steel recycling plant could face delays under the new Labour government that has come to power.
"In U.K., we have safely ceased operations at one of the blast furnaces at Port Talbot and are on track to close the remaining blast furnace by September 2024," says T V Narendran, chief executive officer and managing director, Tata Steel in Q1 result statement.
The previous government led by the Conservative party had agreed to give a 500 million pounds financial support to the steelmaker for its transition from carbon emission intensive blast furnace to green steelmaking with electric arc furnaces. However, the deal hadn't been formalised during the Rishi Sunak government's term.
"We are committed to supporting affected employees alongside providing multiple training and community support schemes," says Narendran. About 2,500 workers are expected to lose their jobs in the U.K. plants of Tata Steel after closure of blast furnaces.
Electric arc furnaces use scrap for producing steel and it emits less amount of carbon. "Sustainable operations are integral to our strategic goals and Tata Steel has launched the first carbon bank in India," Narendran adds in his statement.
The U.K. revenues were 646 million pounds and EBITDA loss stood at 91 million pounds in Q1. Responding to Tata Steel shareholders' questions at the recent annual general meeting, Tata Group chairman N Chandrasekaran says he doesn't see any change in the company’s strategy because of change in government.
Tata Steel had been struggling with losses in the U.K. since its acquisition of the Corus Group in 2007 for $12 billion. The company was using the cashflow from India to service the loans taken for Corus purchase. Chandrasekaran said at the AGM that they had "good discussions with both the previous and current governments" and working closely with govt, the unions and local govt in Wales.
The existing steel making assets, which are near the end of their life, are operationally unstable and are causing unsustainable losses of one million pounds a day, the company said earlier.
"With respect to the U.K. transition, we are proceeding as per previously announced timelines for the closure of the heavy end, a step which is critical to address the deep cash burn associated with the upstream end of life assets," says Koushik Chatterjee, executive director and chief financial officer. Tata Steel UK is on track with regard to supply chain preparedness for imports of semi-finished steel which will be used by the downstream assets to continue to service customers, after the closure of the blast furnaces, he adds.
The Voluntary Redundancy Aspiration process was launched on July 10 and will close on August 7, says the CFO. "We are working closely with the recently elected U.K. government on finalisation of grant funding process for the new Electric Arc Furnace project," he adds.
