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Tata Steel Plans to Sell British Plants, Threatening 15,000 Jobs

Thursday, Mar 31, 2016

Prime Minister David Cameron faced a new economic and political challenge on Wednesday after the Indian owner of much of Britain’s steel industry said it could no longer swallow the large losses being generated by its plants and would try to sell them.

The owner of the plants, Tata Steel, has been squeezed by cheap imports of Chinese steel into Europe, and its announcement suggested that if no buyer could be found it would consider closing them, endangering at least 15,000 jobs.

The British steel industry’s woes have been caused in part by the European Union’s inability to agree on higher tariffs on Chinese steel, making the fate of the Tata plants another flash point in Mr. Cameron’s campaign to persuade his country to vote to remain in the bloc in a referendum on June 23.

The news struck particularly hard at Britain’s largest steel plant, the Port Talbot works in Wales, which has been the heart of that community since 1901. The Tata board acted to cut its losses despite entreaties from the British government and the local member of Parliament, Stephen Kinnock, who had flown to India to plead the case.

With 7,000 jobs at stake in Port Talbot, Mr. Cameron’s government is considering “all options” to save the plant, Anna Soubry, the cabinet minister for business, said on Wednesday. Those options include government support and subsidy, a highly unusual stance for a Conservative government.

Mr. Cameron will fly home from a European vacation for an emergency cabinet meeting on Thursday, while Ms. Soubry’s boss, Sajid Javid, the cabinet secretary for business, flew home from Australia.

Although comparatively higher wages and energy costs have contributed to the financial woes of the Tata plants, the biggest problem for Port Talbot and British steel production is the importation of cheap Chinese steel. Chinese steel imports into Europe have more than doubled in the last two years.

But the European Union has regulations governing the tariffs that can be applied on imports and on the amount of state aid that governments can provide to national industries.

Ms. Soubry, while emphasizing the government’s desire to save Port Talbot, cautioned that there was a limit to what the government could do. “We have to be very careful because we have these state aid rules, which have been established for well over 50 years,” she told the BBC.

Leanne Wood, leader of Welsh party Plaid Cymru, described the news as “devastating” and called for the Welsh regional assembly to be recalled from its Easter break to respond to the crisis. The Labour Party leader, Jeremy Corbyn, urged Mr. Cameron to recall Parliament for a debate on the future of “a strategic U.K.-wide industry” and blamed the government for not intervening sooner.

“Steelworkers and their families will be desperately worried about the uncertainty,” Mr. Corbyn wrote to Mr. Cameron in a letter made public by the Labour Party. “The government is in disarray over what action to take.”

India and the United States have imposed significantly higher tariffs on the importation of Chinese steel, but the European Union has not done so because all 28 member nations have not been able to agree — Britain among them.

It is not clear whether Britain would seek higher tariffs if it were to leave the European Union, but the British news media, which tends to be critical of the European Union, has blamed Brussels for preventing Britain from taking greater steps to protect the industry.

The increase in Chinese imports, coupled with slow demand, has helped the price of steel in Europe plunge by half since 2011. Energy costs, meanwhile, have gone up, and the Port Talbot plant alone uses about as much energy every year as the city of Swansea, with more than 240,000 inhabitants.

Tata has invested in Port Talbot and earlier in smaller plants in Scunthorpe, but has lost some 2 billion pounds — about $2.9 billion — over the last five years, and could not justify the continuing losses, Tata officials said. The company is seeking to sell its British assets, as it is already doing with Scunthorpe, but that may take many months, even if successful. Tata employs at least 15,000 people in Britain, all of whose jobs would be at risk, with 25,000 more jobs in the industry’s supply chain.

 

Source : nytimes.com

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