The future of the huge Port Talbot steelworks is under threat unless the UK Government provides £1.5bn in financial support to reduce its emissions, chair of the Indian steelmaker has said.
Speaking to the Financial Times, chairman of Tata Group, Natarajan Chandrasekaran, said action to close UK operations would be taken in 12 months if a financial support package from the Westminster was not forthcoming. Tata's primary steelmaking plant in Port Talbot employs around 4,000 with 8,000 in total in the UK with its downstream businesses, which include those at Shotton and Trostre.
The FT said that as part of a £3bn green investment strategy, Tata intends to convert its Port Talbot operation from fossil-fuel powered blast furnaces to electricity-powered arc furnaces. This would effectively see an end to primary steelmaking from raw materials and steel being made from recycling steel, which would significantly reduced emissions although the electricity demand would be enormous. Tata is looking for the UK Government to provide half of the £3bn investment cost.
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Tata, which in the past has dismissed speculation of transforming Port Talbot into an arc furnace operation, has been asked to clarify its intentions. Arc furnaces would require significantly less workers than the existing blast furnace operations.
However, would Tata make such an investment with electricity costs so high in the UK compared to competitor steelmakers in countries like Germany?
The other option, which would also require significant investment, is to maintain the two blast furnaces at Port Talbot, but employ carbon capture and storage technology- using the carbon to provide power. While technology is advancing in carbon capture and storage, electric arc furnaces have a proven track record.
The two blast furnaces at Port Talbot have had investment to extend their production lives. Blast furnace 4 in 2012 had its life extended by 20 years to 2032. Blast furnace 5 will expire in 2026, following investment in 2018.
From a planning perspective, Tata would need to move quickly if it is to start a phased or complete arc furnace transformation, with arc furnace capacity ready to take over from blast furnace 4 in 2026.
The other option, is that Tata from 2026 just operates one blast furnace (4). Both furnaces have capacity to provide 5 million tonnes of steel, but are currently operating at around 3.6 million equally split. . Blast furnace 4 has capacity to produce 2.6 million tonnes.
Tata has been in discussions with the UK Government over a funding support for the last two years, originally under the Treasury's so called project birch initiative - set up to back firms deemed of being of national and strategic importance to the UK Government.
Mr Chandrasekaran said: "A transition to a green steel plant (Port Talbot) is the intention that we have... But this is only possible with financial help from the government.
"We have been in discussions over the last two years and we should come to an agreement within 12 months. Without this, we will have to look at closures of sites."
Charlotte Childs from the GMB Union, said: " This is deeply worrying news. UK steel is a critical part of the nation's industrial infrastructure. It's essential the government acts quickly and show they are serious."
A spokesperson for Community, the steelworkers' union and the largest trade union at Tata Steel, said: “This intervention from Tata is shocking, and has been made without any consultation with the trade unions. For months we’ve been in discussions with the company, but we should be clear there is no agreement on the decarbonisation roadmap.
"The unions have been working with our experts exploring low carbon options that will protect our country’s steelmaking capacity, jobs and communities. That process is unfinished, but Tata’s comments make a mockery of the company’s commitments to an open and transparent dialogue with the unions.
Tata and the Government must do whatever it takes to secure the future of steelmaking at Port Talbot, and work with the trade unions to safeguard our vital strategic industry. Steelworkers will feel badly let down by Tata, and the company must live up to their moral and social responsibilities to the workforce.”
The UK Government said:" Steel plays a critical role in all areas of the UK economy and Tata is a valued steel producer and significant employer in the UK."
Labour MP for Aberavon Stephen Kinnock, whose constituency covers the steelworks said: "Yet again they're being let down by a zombie Conservative government which seem to think we should just stop making steel in Britain and start importing it all from China instead.
"There is not a single steel industry in the world that is able to decarbonise without substantial government support, so why on earth have Rishi Sunak, Liz Truss and the rest of the cabinet been dragging their feet on this for so long?".
A Welsh Government spokesperson said: “Our focus continues to be to explore all avenues to secure a successful, low carbon future for Welsh steel. This goal is entirely possible, but it requires action and grip from the UK Government.
“We have repeatedly called on UK Ministers to urgently bring forward a package of support to secure steel-making at Port Talbot. Welsh Government officials are today engaging with the company, UK Government and trades unions to seek an urgent resolution.
“The steel industry - and its highly skilled, dedicated workforce - is a crucial cornerstone to our economy and its future is essential to our prosperity and security. We will stand up for steel – and steelworkers – in Wales.”
Ian Price, CBI Wales director, said: “As a major employer and key economic hub, the latest news from Port Talbot is extremely concerning. We need an urgent solution to the current impasse to safeguard jobs and protect one of Wales’ most important export industries.
“The UK’s economic future is intertwined with its success in managing the green transition. The UK Government must act boldly and decisively to boost business confidence and investment across the country, including committing to support Port Talbot Steelworks’ transition to a greener and more sustainable future.”
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