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After months of negotiations, Tata Steel and the UK government have jointly agreed on a proposal to invest £1.25 billion in a modern electric arc furnace for steelmaking at the Port Talbot site. The investment includes a grant of up to £500 million from the UK government.
Tata Steel had earlier warned that it could shut down the plant without UK government support
‘Defining moment’
N Chandrasekaran, Chairman, Tata Group, said the agreement with the UK Government is a defining moment for the future of the steel industry and indeed the industrial value chain in the UK.
The proposed investment will preserve significant employment and present a great opportunity for the development of a green technology-based industrial ecosystem in South Wales, he said.
‘Opportunity’
TV Narendran, Managing Director, Tata Steel, said the UK operation of the company has been facing significant challenges due to the heavy-end facilities approaching their end of life.
The proposed project, which is one of the largest investments in the UK steel industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders, he said.
“We will undertake a consultation with the Unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel UK,” he added.
The project would bolster the UK’s steel security and reduce direct emissions by 50 million tonnes over a decade. With a high degree of circularity, it would leverage strategic, domestically available scrap steel and promote local value addition within the UK.
The consultation on the proposal and the transition period include a potential deep restructuring of the carbon-intensive, unsustainable iron and steelmaking facilities at Port Talbot, where the existing blast furnaces and coke ovens are reaching the end of their operational lives.
The proposed project would also involve Tata Steel’s Balance Sheet being restructured with the potential elimination of the current cash losses in the UK operations and non-cash impairment of legacy investments.
During the transition period and project phase, Tata Steel UK would import additional steel substrate from stable supply chains to feed its downstream units.
Further to the investment proposal, Tata Steel will also invest about £20 million over 4 years to set up two additional centers of Innovation and Technology in the UK at the Henry Royce Institute in Manchester (for advanced materials research) and at Imperial College London (for research in Sustainable Design and Manufacturing).
The new investment project could be operational within 36 months.
Tata Steel will work to finalise the terms of the grant funding agreement with the UK Government and seek approvals from the Welsh Government for the proposed project.
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