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Metal Miner

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Tata Steel Looks For UK Support To Make £1.2 Billion Green Furnace Upgrade

  • Tata Steel confirms the need for government investment to support decarbonization efforts at the Port Talbot plant.
  • Previous government funding offers were rejected by Tata; the current negotiations are reportedly happening at the "highest levels" including the Prime Minister's office.
  • Industry experts question the timing of the funding request, suggesting it may be influenced by the upcoming UK general election, with concerns over potential job losses at the plant.

Via Metal Miner

Tata Steel is in talks with the UK government to acquire £500 million ($630 million) in funding. The steelmaking multinational confirmed the funds would help the Port Talbot plant replace its operating blast furnaces with electric arc furnaces. The news comes as the Tata Steel share price recently reached a high for the year.

“Given the financially constrained position of our UK business, any significant change is only possible with government investment and support,” Tata Steel stated on September 3. “As also seen in other steelmaking countries in Europe where governments are actively supporting companies in de-carbonization initiatives.”

One official at Port Talbot told MetalMiner that the financing talks are taking place at the “highest levels.” This means the collaboration is between Tata Group itself and the Prime Minister’s office. “That’s lasted for a few years,” the official added, though he declined to indicate when talks would conclude. 

Tata Steel Share Price Could Change Thanks to the Offer

Port Talbot is in Wales, about 75 kilometers west of the capital city of Cardiff. Tata also plans to invest about £700 million ($875 million) of its own funds into the facility. 

Earlier in 2023, the UK government proposed £300 million ($375 million) in aid to the plant, plus assistance in covering energy costs. However, reports at the time noted that Tata rejected that offer.

The Port Talbot official also declined to indicate with what the plant would replace its two operating blast furnaces. There was also no discussion of potential capacities, the number of electric arc furnaces, or if it would add value-added equipment, such as thin slab casters.

Some Experts Feel the UK is Playing Politics

Port Talbot’s two blast furnaces can produce about 4.8 million metric tons of pig iron per year. Meanwhile, its two basic oxygen furnaces can pour 5 million metric tons of crude steel per year. The Tata official said the company then casts this into slab and then rolls into hot and cold rolled coil. 

Projected crude steel production for 2023 at the site is 3.2-3.4 million metric tons. The source noted that this is “just below” the 3 million metric tons seen  in the previous year. The Tata Steel share price recently reached 131.75 Indian Rupees on September 5, a high for the year. If the talks produce a successful result, it’s possible this figure could go much higher.

However, one industry watcher expressed skepticism about funding from the UK government. “That’s big money for the government and for the taxpayers,” that source told MetalMiner.

An upcoming general election in the United Kingdom, due to take place no later than January 28, 2025, could be behind the funding issue. “They won’t want to see thousands of people turfed out of work,” the source said of the Conservative Party, which has a majority in the House of Commons. When asked about the talks, the source added, “I think that they will drag it out as long possible, at least until the elections.”

The industry watcher also noted the high costs for steelmaking in the United Kingdom, along with doubts regarding the plant’s location as compared with China. “If you are not strategically located, you better have a very good commercial team,” the source warned. One metric ton of crude steel costs $600-700 to produce in the United Kingdom against $400-500 in China.

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By Christopher Rivituso

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