The transformation it said would secure most of Tata Steel UK’s existing product capability and maintain the country’s self-sufficiency in steelmaking, while also reducing Tata Steel UK’s CO2 emissions by 5 million tonnes per year and overall UK country emissions by about 1.5%.
However, up to 2,800 employees are expected to be potentially affected in Port Talbot, South Wales, out of which around 2,500 roles would be impacted in the next 18 months.
The plans follow detailed discussions with the UK multi-trade union representative body (UK Steel Committee) and its advisors, in which Tata Steel said it "carefully considered their endorsed proposal for maintaining a single blast furnace".
Having considered that proposal, Tata Steel has agreed to adopt elements of it, but considers that continued blast furnace production is not feasible or affordable. Tata Steel will now commence statutory consultation on the proposed restructuring plan and support arrangements for affected employees.
The company said it “will endeavour to maximise voluntary redundancies” and proposes to commit in excess of £130m to a comprehensive support package for affected employees, including redundancy terms, community programmes, skills training and job-seeking initiatives.
This is in addition to the £100m funding for the Transition Board set up with UK and Welsh governments to support affected employees, contractors and communities.
Port Talbot’s two high-emission blast furnaces and coke ovens would close in a phased manner with the first blast furnace closing around mid-2024 and the remaining heavy end assets would wind down during the second half of 2024. The proposal also includes a wider restructuring of other locations and functions across the company, including the intended closure of the Continuous Annealing Processing Line (CAPL) in March 2025.
In discussion with the UK Steel Committee, Tata Steel has agreed it would continue to operate the hot strip mill through the proposed transition period and in future. In addition, the downstream and steel processing centres would continue to serve customers by utilising imported semi-finished steel from Tata Steel plants in the Netherlands and India as well as other select strategic suppliers.
Under the transformation plan, Tata Steel will embark on a £1.25bn investment in Electric Arc Furnace technology in Port Talbot and asset upgrades to secure long-term, high-quality production at the UK’s largest steelmaker.
The proposed investment is supported by the UK Government, which has committed up to £500m to enable the transformation. Tata Steel plans to invest £750m in the project, alongside funding for a comprehensive support package for affected employees, business restructuring and transition costs as part of its long-term commitment to UK production.
Tata Steel has engaged in several months of detailed discussions with the UK Steel Committee and its advisors, which examined feasibility studies and financial analysis of the long-term viability of steelmaking at Port Talbot.
In discussions with the UK Steel Committee, Tata Steel has agreed to revise its proposal and would continue to operate the Port Talbot hot strip mill throughout the transition period and in future.
It has also carefully considered the committee’s endorsed proposal for partial continuity of blast furnace steelmaking assets until Electric Arc Furnace facilities are commissioned in Port Talbot.
As part of the review of the endorsed proposals, Tata Steel commissioned independent engineering studies and analysis of alternative-scenarios which concluded that continued blast furnace production while constructing the new Electric Arc Furnace is not feasible due to:
- The projected operating costs of such a configuration are financially unaffordable
- Building the Electric Arc Furnace in an already operating steel melt shop would be fraught with risk, significantly increasing costs, creating a sub-optimal plant layout, delaying implementation of the plan and jeopardising the proposed business transformation programme
- The near end-of-life condition and deteriorating operating performance of several heavy end assets in Port Talbot
In order to be able to deliver the proposed Electric Arc Furnace in 2027, Tata Steel has begun engineering design work and construction planning for a furnace which would be among the most modern in the world. It is in advanced planning discussions with National Grid in relation to enabling infrastructure and has also begun engagement with the local authority and regulators.
T V Narendran, Tata Steel’s CEO and MD, said: “The course we are putting forward is difficult, but we believe it is the right one. Having invested almost £5bn in the UK business since 2007, we must transform at pace to build a sustainable business in the UK for the long-term.
“Our ambitious plan includes the largest capital expenditure in UK steel production in more than a decade, guaranteeing long-term, high-quality steel production in the UK and transforming the Port Talbot facility into one of Europe’s premier centres for green steelmaking.
“We recognise this proposed restructuring would have a major impact on the individuals and communities concerned, whom we will support with dignity and respect. In consultation with our union partners, Tata Steel will offer a comprehensive support package to mitigate the impact of any anticipated job losses, including helping employees to retrain and find new jobs.
“We will continue our work with the UK and Welsh governments, trade unions and the community to help those who may be affected through the proposed transition.”
Subject to consultation, and subsequent to the proposed closure of some of the heavy end assets in Port Talbot, Tata Steel will continue to focus on facilitating wider economic regeneration in the Port Talbot area.
The proposal to invest in Electric Arc Furnace technology, which would be fed by predominantly UK-produced scrap, follows a comprehensive analysis into all the financial and technological options available. The transition mirrors the successful installation of such low-carbon production facilities in other major steel producing markets such as the United States, where it has cut emissions whilst guaranteeing production of complex, high quality steel.
On completion, the programme would transform the competitiveness of Tata Steel UK, secure most of its capability in terms of end products, whilst cutting its carbon emissions by about 85% and the UK’s overall carbon emissions by about 1.5%.
The proposal to use UK-sourced scrap as the raw materials for future steelmaking, it said, would also maintain the country’s self-sufficiency as almost all of the raw materials for the current blast furnaces need to be imported.
Following today’s announcement, the company will now begin a formal information sharing and consultation process with employees and their representatives on the proposals.
