Tata Steel to go ahead with its £1.25-bn investment to build Furnace in Port Talbot

Tata Steel has reportedly said it will continue to proceed with its Great British Pound (GBP) 1.25 billion investment to build a state-of-the-art Electric Arc Furnace for steel production in Port Talbot in collaboration with the UK government. Tata Steel announced the closure of two of the UK’s four active blast furnaces in January this year, which came as a major blow to Port Talbot and the unions there.

Tata plans to replace the two blast furnaces – which produce molten iron from iron ore – with electric arc furnaces. Tata on Thursday said it planned to place orders for the furnace equipment by September and begin construction by August 2025.

In a statement on Thursday, the company said: "Following its 19 January 2024 proposal to restructure the UK business and 7 months of formal and informal discussions with the UK Steel Committee (the multi-union forum) and its advisers, Tata Steel has today announced its decision, paving the way for a major transformation of Britain’s largest steel plant at Port Talbot, in south Wales."

The company said the investment in UK will preserves 5,000 jobs and secures future supplies to customers.

The multi-union proposal to maintain one blast furnace through the transition would have incurred at least 1.6 billion pounds of additional costs. It would have also created significant operational and safety risk and put the future business continuity in jeopardy, it said.

The shift to new furnaces could cut UK emissions by about 2% if renewable electricity is used. It will be backed by about £500 million in subsidies offered by the Rishi Sunak-led government, the Guardian reported.

Tata Steel CEO TV Narendran said: “Having looked carefully at all the options over the past seven months in consultation with union representatives, we have decided to proceed with our proposed restructuring and transition. This is the most viable proposal, in contrast to the unions’ unaffordable plan, which has high inherent operational and safety risk.”

"We will continue to work with the trade unions over the following 2 weeks to agree a memorandum of understanding on the future of the UK business and the impact on our people," he added.

The company said it has also reached alignment with the UK Steel Committee that production on the Coke Ovens and one Blast Furnace needed to cease by mid-2024.

Rajesh Nair, CEO, Tata Steel UK, said while the company has agreed to keep the Hot Strip Mill running through the transition, the unions’ plan presents significant financial, operational and safety challenges and delays the transition to green steel by two years.

Tata is the UK’s largest steel producer and employs about 8,000 staff in the UK, with about half based at Port Talbot. In FY24, Tata Steel UK recorded a negative EBITDA of 373 million pounds and a negative free cash flow of 623 million pounds.