Tata Steel Europe ‘still in talks’ with UK govt on support, denies media reports
Tata Steel Europe, the UK’s biggest steelmaker, is still in talks with the British government on possible support for the company’s operations in the country, which include the major Port Talbot blast-furnace-based steelworks in South Wales, a company spokesman told S&P Global Platts on Aug.16.
The company denied press reports in recent days that its negotiations with the government for a support package had fallen though because the steelmaker, part of an Indian-owned conglomerate, did not qualify for the UK government scheme.
“Tata Steel remains in ongoing and constructive talks with the UK Government on areas of potential support,” the Tata Steel Europe spokesman said. “As these discussions have not reached a conclusion, it would be premature to comment on any options that may or may not be under consideration.”
Platts understands that Tata Steel, which employs around 8,000 people in the UK, has has been in negotiations for around three months with the government’s Department of Business, Energy and Industrial Strategy (BEIS) on a loan under its Project Birch scheme aimed to safeguard UK industrial operations that have suffered as a result of the COVID-19 pandemic.
Reports not confirmed by Tata say the steelmaker has been seeking about GBP500 million ($654.75 million)-worth of support from the government, and that there has been talk of the government offering a loan in return for equity to the steelmaker.
BEIS did not respond to Platts’ requests for clarification Aug.16.
Spanish-owned Celsa Steel UK, the largest UK manufacturer of reinforcing steel with annual production capacity of 1.2 million mt of long products, was granted an emergency loan by the UK government early-July to allow the company to continue trading amid difficult market conditions caused by the coronavirus pandemic
The Celsa loan – estimated by media at GBP30 million – is expected to be repaid in full and is linked to a series of conditions, including job-protection, climate change and net-zero targets, BEIS said in a July 2 statement.
Celsa UK produces steel in Cardiff, South Wales, using electric arc furnace technology which typically has a lower carbon footprint than the blast-furnace production route.
Tata sees ‘slower’ recovery for European operations
European Steel Association Eurofer said earlier this month that total output by steel-using sectors in the European Union, including construction and automotive, is set to fall by 12.8% in 2020 and to recover by 8.9% in 2021.
In the UK, the picture is further clouded by increasing uncertainty over whether the government will reach a Brexit trade deal before the deadline later this year. A no-deal could reduce production in the UK automotive sector, one of Tata Steel Europe’s most important customers for its flat rolled steel.
Tata Steel said its in its April-June results announcement Aug. 13 that it expects its overall demand recovery prospects in Europe to be “slower” than in the rest of the group, with an overall 2020 European demand decline for its products of about 16%.
Tata Steel Europe also operates an integrated steelworks in the Netherlands. Its Port Talbot blast furnace site has been kept in operation at a reduced rate in recent months, while its cold mills have continued operations based on customer orders. Port Talbot has a designed steelmaking capacity of 5 million mt/year.
The company reported Aug.13 that “Tata Steel Europe’s performance (in the April-June quarter) was affected by lower deliveries and sharp decline in European spreads to an unsustainably low level. ….the company did receive short support from the UK and Netherlands Government including cash flow deferrals of payables.”
British Steel — purchased this year by China’s Jingye Steel Group — and Liberty Steel Group are also understood to have applied for government support as a result of the UK market downturn caused by the pandemic.
According to Platts’ calculations, cumulative loan requests to the UK government from steel producers have so far approached around GBP1 billion.