Tata Steel split raises concerns for Port Talbot future

Tata Steel's decision to split its UK and Netherlands businesses will be deeply concerning to the steelworkers of south Wales.

The company has made no secret of wanting to exit Europe to focus on the faster-growth domestic Indian market. This strategy has culminated in it stripping out the south Wales operations from its mainland European business.

Tata is hoping to sell the latter, which includes its IJmuiden plant, the lowest-cost slab production facility in western Europe, to Swedish steelmaker SSAB.

IJmuiden sits in the first quartile of the cost curve, while Port Talbot — hobbled by previous decades of nationalisation, privatisation and politically driven investment decisions — is in the third. Port Talbot has been the loss leader for the European business, and it is difficult to conceive that Tata will want to hold on to it while selling the more cost-competitive Netherlands plant.

So the fate of the Port Talbot business for now rests, it seems, in the hands of UK prime minister Boris Johnson's government, with the parent company reiterating that it cannot rely on cash infusions from India. "Tata Steel continues its dialogue with the UK government on potential measures to safeguard the long-term future of Tata Steel UK and is also reviewing all options to make the business self-sustaining without the need for any funding support from Tata Steel India in the future," the company said in a statement on 13 November.

It is "high time" for the government to "stand up and be counted", according to UK trade union Community's general secretary, Roy Rickhuss, who suggested there is "no doubt" a sustainable future for the plant relies on government support to enable the transition to lower-carbon steelmaking.

The talks between Tata and the UK government have been ongoing for some time and have focused, in part, on a loan in return for moving away from blast furnace-based production to the electric arc furnace (EAF) route.

While EAF-based production would reduce the need for costly imported raw materials from Australia and elsewhere, and allow the mill to soak up comparatively abundant domestic scrap, it is not necessarily the panacea that some believe it will be. UK power costs are high compared with those of Europe and the US. And the producers that have made EAF technology work have typically done so using direct reduced iron and other rolling-mill technologies that reduce costs and improve quality.

Expressions of interest in Port Talbot have come from other bidders in the past, and these potentially could resurface. Liberty Steel has shown interest, and there have been suggestions that British Steel owner Jingye Steel may also see value in the plant.

By Colin Richardson