The UK’s biggest steel owner has reportedly said it needs the government to agree to provide £1.5 billion in subsidies next year to help it transition to greener production methods or it will have to look at site closures.
Indian group Tata owns the huge Port Talbot steelworks in South Wales, which employs around 3,500 people and is one of only two in Britain capable of turning iron ore and coal into cast iron and steel. Overall, group subsidiary Tata Steel UK (TSUK), which earlier this week posted its first annual profit since 2009, employs around 8,000 people in the UK.
The company has been in protracted talks with the government about co-investing to convert the two blast furnaces at Port Talbot into electric arc furnaces, which produce much lower carbon emissions.
Talks had initially focused on Tata trying to negotiate around £500m in government funding. However, the Financial Times reports that the company is seeking up to half of the £3 billion cost of the conversion and decommissioning process.
“Transition to a greener steel plant is our intention… But this is only possible with the financial help of the government,” Tata Group chairman Natarajan Chandrasekaran told the FT.
“We have been in discussions for the last two years and we should be able to reach an agreement within 12 months. Without that, we will have to look at site closures.”
The decarbonization plans would include closing the two blast furnaces, which would halt primary steelmaking, as the two electric arc furnaces are built. Tata wants to start the conversion process in 2025.
Unions fear job losses, as it takes about two years to build an electric arc furnace and requires fewer workers.
“Our steel members have been put through the wringer for years,” said Charlotte Childs, national officer of the GMB union. “Tata and the government must safeguard and protect the industry as soon as possible.”
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Despite the return to profitability, the company said it still needed support from the UK government for its steel business to remain viable in the long term and to switch to greener production methods.
“TSUK continues to hold discussions with the UK Government to seek support for the transition to low-carbon steelmaking, which is a vital part of securing a sustainable long-term future for the business,” he said .
About 80% of the UK’s steel is made in blast furnaces at two sites: the Tata plant in Port Talbot and a British Steel site in Scunthorpe, Lincolnshire.
“Steel plays a critical role in all areas of the UK economy and Tata is a valued steel producer and a major employer in the UK,” a UK government spokesman said.