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Tata threatens to shut Port Talbot steel works

·2-min read
Tata steelworks in Port Talbot
Tata steelworks in Port Talbot

Indian conglomerate Tata Group has threatened to shut Port Talbot steel works unless it is given a £1.5bn government lifeline to help reduce carbon emissions.

The company’s Tata Steel UK business, which owns the plant in South Wales, has been in talks with the Government about decarbonisation plans over the past two years, but those have now stalled. As one of Britain's largest industrial groups, Tata Steel UK is a huge emitter of carbon dioxide.

“A transition to a greener steel plant is the intention that we have . . . But this is only possible with financial help from the government,” Natarajan Chandrasekaran, chairman of Tata Group, told the Financial Times. He added that a deal would need to be struck in the next year or the site would close.

Tata UK Steel, which has nearly 8,000 employees, posted an £82m pre-tax profit in the year to the end of March, compared to a loss of £347m for the previous year amid record steel prices and a recovery in demand. It is not clear how much of this profit related to the Port Talbot site.

Cheap steel imports have slashed margins for steel makers, although the Government does protect some grades with tariffs to defend the industry.

Steel making is considered one of the hardest industries to decarbonise and the plant requires huge investment in order to switch to either electricity or hydrogen to make the metal, using green power. As it stands, Port Talbot uses natural gas and coal to smelt steel which is used in the UK’s car making industry and construction, among other industries. Losing the plant would threaten the viability of those businesses.

Under decarbonisation plants, Port Talbot's two blast furnaces would be closed and replaced with electric arc furnaces which use recycled steel, reported the FT. This would end so-called primary steel capability at the plant where steel is made from iron. It added that Tata is seeking half the £3bn costs of converting the mill from the government.

Decarbonising the UK steel industry is essential for Britain to meet its net zero targets by 2050. The Climate Change Committee, a government advisory body, has said the sector needs to be “near zero” by 2035.

Owners of steel mills in the UK have struggled to make the businesses profitable in recent years, with the industry plagued by a number of high-profile collapses and restructurings, the most recent being last year's nationalisation of Sheffield Forgemasters.

Much like fishing, steel carries with it a disproportionate amount of political focus compared to its size. In 2020 the £2bn it contributed to the economy was the equivalent of just 0.1pc of total economic output and 1.2pc of manufacturing. Yet it is a key component in Britain’s industries and a large contributor to the nation’s carbon output.