Tata Steel to proceed with £1.25 billion investment in Port Talbot, will close existing heavy end assets in coming months

Tata Steel said on Wednesday it will proceed with its £1.25 billion investment to build a state-of-the-art electric arc furnace in Port Talbot and commence closure of the existing heavy end assets in the following months. The development comes after seven months of formal and informal national level discussions with the UK trade unions.

Shares of Tata Steel were trading 0.54% higher on Thursday.

The company said it has informed the trade unions that Port Talbot’s two blast furnaces No.5 and No.4 will close by the end of June, and by the end of September, respectively.

Tata Steel said the multi-union proposal to maintain one blast furnace through the transition would have incurred at least £1.6 billion of additional costs and would have created significant operational and safety risk, putting the business’s future continuity in jeopardy.

Tata Steel’s CEO and Managing Director TV Narendran said having looked carefully at all the options over the past seven months in consultation with union representatives, the company decided to proceed with its proposed restructuring and transition.

“This is the most viable proposal, in contrast to the unions’ unaffordable plan which has high inherent operational and safety risk. Our proposal secures a long-term future for the business and preserves the majority of jobs in the UK. We will continue to work with the trade unions over the following two weeks to agree a memorandum of understanding on the future of the UK business and the impact on our people,” he said.

Tata Steel said it has offered generous severance terms to impacted employees, under a financial support plan, alongside wide-ranging retraining and community support schemes. A voluntary redundancy aspiration process will be launched across Tata Steel UK from May 15, 2024.

Tata Steel also pointed out that it has begun preparations to place equipment orders for the electric arc furnace by September 2024, and will begin enabling and preparatory works at the site by December 2024. Based on the current permitting timelines, it will begin construction on the project by August 2025, it said.

Shares of Tata Steel have risen over 20% since the beginning of the year. The stock has gained over 57.5% in the last one year.