"Tata Steel to Invest £1.25 Billion in Electric Arc Furnace at Port Talbot"

Tata Steel has announced a £1.25 billion investment in a new modern electric arc furnace at its Port Talbot plant, initiating the closure of its existing heavy-end assets in the coming months. The investment is part of a significant restructuring plan that aims to secure the future of the UK's steel industry and maintain 5,000 jobs while supporting the UK's transition to green steel.

The company will begin a Voluntary Redundancy Aspiration process across Tata Steel UK starting May 15, following seven months of formal and informal discussions with UK trade unions. Tata Steel has reached a detailed agreement with the UK Government on a proposed grant package to support the £1.25 billion investment, with final documents expected to be signed in the coming weeks.

As part of the restructuring, Tata Steel has informed the trade unions that two blast furnaces will close by the end of June and September. This will mark a major shift in the plant's operations, with plans to order equipment for the electric arc furnace by September, start preparatory works at the site by December, and commence construction by next August.

The company revealed that the multi-union proposal to maintain one blast furnace during the transition would have resulted in at least £1.6 billion of additional costs and created significant operational and safety risks, potentially jeopardizing the business's future. Additionally, maintaining one blast furnace would delay the transition to green steel by two years.

The restructuring plan has been influenced by Tata Steel UK's negative financial performance, with a negative EBITDA of £373 million and a negative free cash flow of £623 million in the 2024 fiscal year. To meet customer demand during this period, Tata Steel UK has supplemented its production with imported material totaling 333,000 tonnes over the last six months.

TV Narendran, Managing Director of Tata Steel, commented that the fresh investment is the most viable proposal given the high costs and risks associated with the unions' plan. The company has also reached alignment with the UK Steel Committee, indicating that production on the Coke Ovens and one blast furnace will cease by mid-2024.

Rajesh Nair, CEO of Tata Steel UK, noted that while the Hot Strip Mill will continue operating through the transition, the unions' plan poses financial, operational, and safety challenges. This makes the proposed investment in the electric arc furnace the best path forward to ensure business continuity and support the industry's green transformation.

HBL