Tata Steel flags risks to Port Talbot if UK delays £500 mn grant

Tata Steel Ltd has expressed concerns over media reports in the United Kingdom suggesting that the £1.25 billion ($1.55 billion) investment at Port Talbot “may be put in peril” amid policy differences between Conservative and Labour parties during the ongoing elections.

The steelmaker had in September last year agreed to invest £1.25 billion, which includes a UK government grant of £500 million ($620 million), to boost greener steelmaking initiatives at Port Talbot in Wales.

The deal aims to modernize production of greener steel and protect skilled jobs, subject to consultation and regulatory approvals.

As per the turnaround plan, Tata will replace existing coal-powered blast furnaces, which are nearing the end of their effective life, with a new electric arc furnace for greener steel production.

Tata Steel will continue with its announced closure of assets and restructuring program at the plant in the coming months, the company said in a statement to the stock exchanges on Tuesday, 11 June.

“We urge and request 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,” Tata Steel said.

Tata Steel said the old, heavy end assets at Port Talbot are “operationally unstable” and are resulting in “unsustainable financial losses.”

The coke ovens, a critical facility for primary steelmaking, had to be closed in March, as operations became infeasible and unsafe, the company said, adding that it is now “compelled” to continue with its plans to decommission blast furnace #5 by June end, followed by decommissioning of blast furnace #4 by the end of September.

The downstream assets will continue to service customers by utilizing imported semi-finished steel till the new EAF is built and commissioned, it added.

In April, the company said it completed an “exhaustive seven-month process of national-level formal and informal consultations on all options with the unions and concluded that the multi-union plan which involved continuity of blast furnace #4 through the transition is not technically, operationally or financially viable, putting the EAF build at risk and delaying the transition by at least two years.”

To mitigate the impact of the announced restructuring, a generous voluntary redundancy program has been developed and is being offered to the impacted employees, it added.

The proposed grant funding from the UK government is “ring-fenced for building the new EAF,” which is critical to securing long-term supply of steel for Tata Steel’s UK downstream assets and protecting 5,000 jobs in various Tata Steel UK sites.

Tata Steel further clarified that the proposed grant 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 therefore 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,” it said in the statement.