The boss of Tata Steel has defended his decision to make thousands of workers redundant at Port Talbot, denying an accusation that £500m in government support represented “the deal of the century” for the company.
TV Narendran, Tata Steel’s global chief executive, told MPs on Wednesday that the decision to close two blast furnaces at the south Wales site was driven by steep losses at the steelworks, which he said came to £160m in the last quarter.
Tata Steel this month announced the blast furnaces would close by the end of summer, to be replaced by a new electric arc furnace part-funded by a £500m government subsidy. The company said the decision would affect 2,500 jobs at Port Talbot and a further 300 at another south Wales site, in Llanwern.
The switch will dramatically reduce carbon emissions, but will require far fewer workers, dealing a devastating blow to the town, whose economy and community is dominated by the steelworks. Welsh steelworkers protested against the blast furnace closure outside parliament on Wednesday.
Narendran told a hearing of parliament’s Welsh affairs committee that the government would not consider covering the UK company’s losses and that shareholders in the Indian-listed parent group had grown weary over the billions of pounds spent on the plant during 15 years of ownership.
Stephen Crabb, the Conservative MP who chairs the committee, said: “We have a plan now which doesn’t save blast furnaces, doesn’t save jobs in Port Talbot, and you’ve managed to get UK government to give £500m for it. I mean, that must be the deal of the century for you?”
Unions at the hearing criticised Tata’s decision. Community, GMB and Unite have all called for the blast furnaces to be kept open for longer. Alasdair McDiarmid, Community’s assistant general secretary, said: “The focus has been on price, rather than what’s best for the country, the industry and the workforce.”
Sharon Graham, the general secretary of Unite, said that “Tata must change direction” and wait for a Labour government; the party has promised about £2bn in extra funding for UK steel on top of the £1bn under discussion with Tata and the Chinese-owned British Steel. Narendran said Tata needed more detail on Labour’s plans.
The hearing took place in a room named after Margaret Thatcher, who closed large parts of the UK’s steel industry in 1980 and privatised the rest.
The Tata decision, along with a similar plan by British Steel to close blast furnaces at Scunthorpe, will represent a new era for the UK as it will leave the country unable to produce steel from iron ore for the first time since the Industrial Revolution. Tata’s plan for Port Talbot instead relies on using scrap steel from the UK, which is mostly exported.
Narendran confirmed that the company would consider investment in direct reduced iron (DRI) technology that could produce net zero iron from ore. DRI could be used with an electric arc furnace and would create hundreds of jobs, although not enough to counterbalance the thousands lost from the blast furnace closures.
Narendran said the company would invest in DRI technology only if it could guarantee a good supply of, at first, methane and then zero-emissions hydrogen. He said the Netherlands, where Tata is building a DRI plant, had a supply of methane gas that was lacking in the UK, but MPs on the committee questioned whether the company could use existing gas supplies piped through south Wales from a terminal on the west coast.
Narendran said: “At a later stage if there is an availability of a lot of gas in Port Talbot and at whatever price … then we can certainly look at setting up a DRI plant in Port Talbot.”
