Companies

Tata Steel in $469-m deal for Teeside plant with Thai co

Vidya Ram London | Updated on March 12, 2018 Published on February 25, 2011

A view of Tata Steel plant in Jamshedpur. (file photo)   -  Business Line

Twenty-two months after embarking on a search for a buyer for its steel plant in northeast England, and a year after being forced to partially mothball the plant, Tata Steel has struck a $469-million deal with Thai firm Sahaviriya Steel Industries.

The company will use the proceeds from the sale of assets in Teeside Cast Products to pay down debts, Mr Karl-Ulrich Koehler, CEO of Tata Steel in Europe, said at a conference call on Thursday. The deal is expected to be completed by the end of March.

Mr Koehler said the sale offered the “best chance of a viable future for TCP on Teeside’’. “It demonstrates our complete sincerity…when we said we were fighting for a future for the steelworks we meant it.”

Among the assets that will be sold are the Redcar Blast Furnace, the Redcar and South Bank coke ovens, TCP’s power generation facilities and the Lackenby steelmaking and casting facilities.

Tata Steel will retain a number of assets including the Teeside Beam Mill and the Skinnigrove Special

Sections Mill, and will still employ around 1,800 people in the area. The company will also be able to use the bulk terminal, Redcar Wharf, through a joint venture agreement.  “Tata Steel intends to have a major presence in Teeside,” said Mr Koehler.

Corus UK — as Tata Steel’s British operations were then known — and Sahaviriya Steel Industries signed a memorandum of understanding in August 2010, following months of speculation about potential buyers for the site. Tata Steel began its search for a buyer after a consortium of four international offtakers pulled out half-way through a ten-year contract to purchase the bulk of TCP’s product.

Tata Steel estimates it lost millions in profits a year as a result and entered arbitration proceedings against the consortium. Earlier this year, the International Court of Arbitration found that the consortium did not

validly terminate their offtake agreements, and is expected to make a decision on any penalties.  Tata Steel will be continuing with these proceedings, Mr Koehler said.

Securing a future for the Teeside plant has proved a highly-sensitive operation, given the region’s economic vulnerability and reliance on employment from Teeside Cast Products, with local and national politicians joining the debate over the past two years.

“Coming just over a year after the plant was mothballed, it is a tribute to both companies involved — Tata Steel and SSI,” said Britain’s Business Secretary Mr Vincent Cable. “The successful sale is the result of the unions, Tata, SSI and the local community working together,” said the national secretary of the Unite union, Mr Paul Reuter.

Sahaviriya Steel Industries plans to invest a total of $1 billion, including $150 million on capital expenditure, over the next two years in Teeside Cast Products, taking the plant to its full capacity of producing around 3.5 million tonnes of slab steel to be sent to its own rolling plants in Thailand.  

The acquisition will enable it to achieve its long-standing ambition of becoming a fully integrated steel

producer, said the SSI President, Mr Win Viriyaprapaikit. The company hopes to restart the blast furnace in the next six months, and begin production by the end of the year.

Published on February 25, 2011
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