London: Tata Steel Ltd will finance the repair of a blast furnace at Britain’s largest steelworks in Port Talbot, Wales, extending its life by seven years and soothing concerns about its commitment to Europe’s steel sector, four people with knowledge of the matter told Reuters.
Tata Steel signed a preliminary deal last year to merge its European steel assets with those of Germany’s Thyssenkrupp AG in a move driven chiefly by a need to address steelmaking overcapacity in Europe.
Fully relining a blast furnace typically costs over £150 million (about Rs1,350 crore) and gives the furnace an additional 20 years of life approximately, while the repairs Tata Steel is looking at will cost about half of that, people in the know said.
Tata Steel declined to comment.
With earnings at the Port Talbot running at a fraction of those at Tata Steel and Thyssenkrupp’s European assets and Britain’s exit from the European Union posing extra risks, the plant was seen as particularly vulnerable in the event of a downturn.
But with Tata Steel looking to extend the life of one of its two Port Talbot blast furnaces and a new vision at the firm’s Indian parent following a top level management change last year, industry people say those concerns are receding.
“We are nowhere near where we were two years ago,” one industry person said, referring to the steel sector crisis of late 2015 in which Tata Steel attempted to sell its UK assets, including the Port Talbot plant which was losing £1 million a day at one point.
Under the terms of a deal Tata Steel signed with British unions in late 2016, the company committed to no forced redundancies at Port Talbot and to keeping a two blast furnace operations at the plant until 2021.
Given that the blast furnace Tata Steel is looking to repair-blast furnace five-was due to end its life in 2018-19, the company was obliged to do something to extend its life by another two years.
Tata Steel is, however, going beyond that with more costly, long-term repairs. It is also investing more than the £100 million a year it committed to spend on its UK assets over the next decade under its deal with unions.
Earlier this month, Tata said it had invested more than £14 million in one of its Port Talbot mills, in a move that would increase capacity by 150,000 tonnes per year. In November, it announced £30 million of investments in the plant.
The Community Union, representing workers at Port Talbot, will continue to push for a full reline of blast furnace five, said Steve McCool, the union’s national officer.
The global steel sector is emerging from a crisis in which global prices slid to 12-year lows in late 2015, resulting in plant closures, capacity reductions, and thousands of jobs cuts. Prices have since recovered some 60%, according to consultants MEPS.
Tata Steel on Friday reported a five-fold increase in third-quarter profit, boosted by strong volume growth in India and rising steel prices. Shares in the company have risen some 6% since the results were published. Reuters
