Tata 'planning to invest £100m a year' in UK steel operations
28 November 2016
Tata Steel is planning to invest up to £100m a year in its UK facilities including Port Talbot steel works, according to a report in the Sunday Times.It comes after reports on Friday that the Indian giant was preparing to commit to keeping its UK operations running for at least a decade.
According to the Sunday Times report, the latest investment plan depends on resolving the issue of the steel workers' pension fund, in addition to improving productivity at its UK plants.
The newspaper says that the Tata believes its UK operations could return to healthy profit within two to three years if productivity is improved and the pension fund can be restructured to remove the company's liabilities.
The new investment would involve both reinvested profits and additional capital from Tata Steel's Indian parent company.
Two blast furnaces could continue to operate at Port Talbot, and the investment could support a mooted merger with ThyssenKrupp, which has been under discussion since the summer.
Back in March Tata announced it was looking to sell its UK steel business, which, like much of the UK steel industry, was said to be bedevilled at the time by high energy costs, a glut of cheap imports and the burden of pension liabilities.
However, the fall in the value of the pound since the Brexit vote in June has eased some of the pressure.
Last week Labour peer Lord Bhattacharyya, who is said to be close to the Tata group interim chairman Ratan Tata, told a meeting in the Midlands that the company was preparing to commit to its UK steel operations for at least 10 years.
He said: “Of course we went through some problems as you have read in the press in the last few months but we are now resolving it and we are working with everybody, with the workers, local authorities and government, in order to make sure that Tata produces steel here for the next 10 years at least. We will do that.”
He added: “We have been going through some problems of course, temporary problems, but nevertheless I think we are on the verge of solving it. We will work with Jaguar Land Rover to introduce thin steels for the new generation of cars.”
A Tata Steel spokesman said: “We continue to actively seek solutions to the company’s structural challenges. Among those challenges are the need to develop a more sustainable business in the UK as well as a self-sustaining future for the British Steel Pension Scheme.
“Tata Steel UK has invested £1.5bn of capital over the last nine years. The company's boards consider the technical feasibility and economic returns of investments when taking decisions, as well as their affordability. The company is pursuing a transformation plan to create a sustainable future for its UK strip products business. The success of this plan is likely to influence decisions on future investments.
"In the current year, the company is pursuing £85m worth of capital investments covering a range of sustenance and improvement schemes. Tata Steel has recently approved schemes focused on improving manufacturing capability to enable the production of premium steels in Shotton, Llanwern, Trostre, Orb in Newport, and other downstream operations as well as environmental schemes for Port Talbot's power plant.
"Investments in packaging steels, electrical steels, an automotive finishing line, laser welding and next-generation coated products are in line with our strategy to enhance our premium product focus for our UK strip products supply chain.
“It continues to be an incredibly challenging period for the steel industry across the world and particularly in the UK. We are all working extremely hard to overcome the global challenges of massive overcapacity and economic uncertainty. The huge efforts made by employees in transforming the UK operations are showing early signs of bearing fruit, which is acknowledged and appreciated by the company.
"However, there remains much to do – we are certainly not out of the woods yet. We must continue to look hard for every opportunity to make our UK operations resilient against the fluctuations of external factors.
“Back in July we said we had initiated discussions, including with thyssenkrupp AG, to explore the feasibility of strategic collaborations through a potential joint venture involving our European business.
"That process is continuing as we continue to believe that a potential strategic combination of strip products businesses offers the best prospects to create a premium, world-class strip steel business with the scale and scope of capabilities to compete successfully on the global stage."