Tata Steel and the UK government on Friday announced a joint investment package of £1.25 billion to convert the former’s coal-based steel-manufacturing at Port Talbot plant into lower-emission electric arc furnace (EAF).
While the UK government will grant up to £500 million, Tata Steel
Port Talbot steelworks is the UK’s single biggest carbon emitter, and the government has been looking to replace dirty blast furnaces. Reports suggest that the money would help finance the new EAF at Tata Steel’s Port Talbot plant, safeguarding 5,000 of the more than 8,000 jobs. However, it raises the prospect of 3,000 job cuts, as the lower-carbon electric furnaces are less labour-intensive. “The project is the first major step towards decarbonisation of the UK’s steel industry. This would also bolster that country’s steel security as the facility would leverage domestically available scrap steel,” Tata Steel said in a statement.
According to Tata Group chairman N Chandrasekaran: “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. It has been an absolute pleasure to work with His Majesty’s government and the Honourable Prime Minister Rishi Sunak in developing the proposed transition pathway for the future of sustainable steelmaking in the UK.”
“The proposed investment will preserve significant employment and presents a great opportunity for the development of a green technology-based industrial ecosystem in South Wales,” he added.
The proposed project would ensure continuity of steel-making at Port Talbot and transform Tata Steel UK into a sustainable, capital-efficient and profitable business. With the UK government support, the project has a “robust” investment case, the statement added.
Tata Steel UK will soon start consultation on the proposal and the transition period for many of the existing assets —such as blast furnaces and coke ovens — which are reaching the end of their operational life.
“Tata Steel UK has been facing significant challenges due to the heavy end facilities approaching their end of life. The proposed project, with one of the largest investments in the UK steel industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders,” Tata Steel’s CEO & MD TV Narendran said.
“We will undertake a meaningful consultation with the unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel UK. With the support of the UK government and dedicated efforts of the employees of Tata Steel UK along with all stakeholders, we will work to transform Tata Steel UK into a green, modern, future-ready business,” he added.
Tata Steel also announced plans to invest about £20 million over four years to set up two additional Centres of Innovation & Technology in the UK. These centres would be set up at the Henry Royce Institute at Manchester (for advanced materials research) and at Imperial College London (for research in Sustainable Design & Manufacturing).
Later in an analysts’ call, Tata Steel CFO Koushik Chatterjee said that setting up the EAF would result in cost savings of £150-170 per tonne through fixed, employee and raw material costs, he added.
“This is a decisive phase of Tata Steel as several assets were approaching end of life at Port Talbot. The carbon costs of running the current facility at Talbot is at £70 million,” he said, adding decarbonisation would be future strategy at Tata Steel.
Tata Steel’s Talbot plant’s life was close to its utilisation period, and the company was in discussions with the UK government to extend it with a decarbonisation grant.
