“Decarbonisation does not mean deindustrialisation,” new UK business secretary Jonathan Reynolds told ET in a response to email queries. “I will be working to safeguard jobs as part of negotiations, securing the future of steel-making communities for generations to come.”
In September 2023, Tata Steel announced plans for a new low-carbon electric arc furnace (EAF) at its Wales factory, to be commissioned in 2027. The project entails investment of 1.25 billion jointly with the UK government, and thus hinges upon final approval of the grant.
After the political switch, however, Asia’s oldest steelmaker may be in for tough negotiations, and have to incorporate a few changes in the deal signed with the erstwhile Conservative administration, officials close to the development said.
At present, Port Talbot operates with the traditional blast furnace. Its transition to an EAF is expected to reduce around 2,800 jobs, a move that is facing strong dissent from the local unions.
Tata Steel did not comment.
‘Redundancies Inevitable’
Tata Sons chairman N Chandrasekaran, though, acknowledged during a meeting of Tata Steel shareholders that this transformation would be difficult, not only from an execution perspective, but also “for some of the employees who will not have a future with Tata Steel, especially in the UK.”
Tata Steel UK was anticipating redundancies, he hinted in his speech. “The company is working with the government and with the Unions to make sure we do sufficient level of investment to be able to support them in their skill development, so they can have a better future,” he said at the company’s annual general meeting on Monday.
Tata Steel will be offering a voluntary redundancy programme to affected employees in the UK, where operations have been loss-making on account of high structural costs and energy prices.
Need for Change
In FY24, Tata Steel UK posted an operating loss of 364 million given the end-of-life condition of its heavy end assets, consequent production disruptions, and high fixed and maintenance cost.
“Our steel sector needs a government working in partnership with trade unions and business to secure a green steel transition that’s both, right for the workforce and delivering economic growth,” the UK business secretary Reynolds said in his emailed response to ET. “I invited steel union leaders into my department so we could sit round the table and discuss our shared commitment to achieve a sustainable, profitable UK steel industry.”
Tata Steel, meanwhile, has been unwilling to accommodate more than it already has by way of community interests in the UK, officials close to the matter said.
Ops Downsized
The company has already shut down its coke ovens, and one of its blast furnaces. It will shut down the second blast furnace in September.
“We believe the new Labour government may try to renegotiate GFA (grant funding agreement) and push for more labour-intensive (direct reduced iron) DRI-EAF configuration instead of mini-mill/standalone EAF as agreed now. DRI-EAF would be more labour-intensive, but also generate higher ebitda/t,” said Satyadeep Jain, analyst at Ambit Capital.