Tata Steel has reportedly secured £500 million in funding from the UK government to develop a low-carbon electric arc furnace (EAF) at its Port Talbot site, with the facility expected to be operational in three years. The total investment for the project is anticipated to be £1.25 billion. Tata Steel first announced this initiative in September of the previous year, under the Conservative government led by Rishi Sunak. However, following recent UK elections and the new Labour government’s focus on protecting local jobs, there have been concerns that the funding or the project could face delays.
The transition from a blast furnace to an electric arc furnace is projected to render approximately 2,800 jobs redundant, out of the 8,000 employees Tata Steel has in the region. Tata Steel’s CEO, T.V. Narendran, highlighted that with the crucial support of the UK government, the transformation could potentially position the Port Talbot plant as one of Europe's leading centres for green steelmaking. Narendran had also mentioned in August that the UK government was open to providing additional funding if new product lines in the region could help preserve some jobs.
The move to the electric arc furnace, which uses scrap steel, is expected to reduce emissions at Port Talbot by up to 90%, and overall emissions in the UK by 8%. Tata Steel has already decommissioned coke ovens and a blast furnace at the site, with plans to shut down another blast furnace by the end of the month. Major construction work at the site is scheduled to start around July of the following year.
Additionally, Tata Steel has signed a Memorandum of Understanding with the UK Steel Committee, offering a substantial support package and a redundancy process for affected employees. In July, Fitch Ratings had downgraded Tata Steel’s outlook from 'stable' to 'negative' due to uncertainties surrounding the turnaround of its UK operations, while maintaining the rating at 'BBB-'.
Tata Steel is anticipating that its UK operations will be neutral or slightly positive at an operating level in the latter half of the fiscal year. For FY24, Tata Steel UK reported an operating loss of £364 million.
