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A SUSTAINABLE FUTURE FOR PORT TALBOT STEELWORKS

Tata Steel and the UK Government jointly agree on a proposal for the largest investment in the UK steel industry for decades.

The proposal lays the decarbonisation pathway towards globally competitive and sustainable steel making in Port Talbot, UK.

Media and resources
Natarajan Chandrasekaran, Chairman Tata Group
N CHANDRASEKARAN, TATA GROUP CHAIRMAN

“The agreement with the UK Government is a defining moment for the future of the steel industry and indeed the industrial value chain in the UK."

"It has been an absolute pleasure to work with the His Majesty’s Government and the Prime Minister Rt Hon Rishi Sunak in developing the proposed transition pathway for the future for sustainable steelmaking in the UK. The proposed investment will preserve significant employment and presents a great opportunity for the development of a green technology-based industrial ecosystem in South Wales. We look forward to working with our stakeholders on these proposals in a responsible manner.”  

Tata Steel’s Chief Executive Officer and Managing Director, T V Narendran

“Tata Steel UK has been facing significant challenges due to the heavy end facilities approaching their end of life. The proposed project with one of the largest investments in the UK steel industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders."

"We will undertake a meaningful consultation with the unions on the proposed transition pathway in the context of future risk and opportunities for Tata Steel UK. With the support of the UK Government and dedicated efforts of the employees of Tata Steel UK along with all stakeholders, we will work to transform Tata Steel UK into a green, modern future ready business.”

 

 

T.V. Narendran
Key points
 
  1. Tata Steel and the UK government announce a joint agreement on a proposal to invest in state-of-the-art Electric Arc Furnace steelmaking at the Port Talbot site with a capital cost of £1.25 billion inclusive of a grant from the UK Government of up to £500 million, subject to relevant regulatory approvals, information and consultation processes, and finalising detailed terms & conditions. 
  2. The project would bolster UK’s steel security and would be the first major step towards decarbonisation of the local steel industry, reducing direct emissions by 50 million tonnes over a decade. With a high degree of circularity, it would leverage strategic, domestically available scrap steel and promote local value addition within the UK.
  3. The proposed project would ensure continuity of steel making in Port Talbot after the transition, and transform Tata Steel UK into a sustainable, capital-efficient and profitable business. With UK Government support, the project has a robust investment case.
  4. Tata Steel UK will soon commence consultation on the proposal and the transition period including potential deep restructuring for the carbon-intensive, unsustainable iron and steelmaking facilities at Port Talbot, where many of the existing ‘heavy end’ assets - such as blast furnaces and coke ovens - are reaching the end of their operational life. 
  5. The proposed project would also involve Tata Steel’s balance sheet being restructured with potential elimination of the current cash losses in the UK operations and non-cash impairment of legacy investments. 
  6. During the transition period and project phase, Tata Steel UK would work intensively to ensure uninterrupted and reliable supply of products to fulfill customer and market commitments including through import of additional steel substrate from stable supply chains to feed its downstream units. 
  7. Further to the investment proposal, as part of Tata Steel’s commitment to advance global research and innovation in materials science for a sustainable future, the company today also announced its intention to invest approximately £20 million over four years to set up two additional Centres of Innovation and Technology in the UK at the Henry Royce Institute at Manchester (for advanced materials research) and at Imperial College London (for research in sustainable design and manufacturing). 

Notes for editors:

  1. Tata Steel UK had completed an important part of its financial de-risking earlier this year after the completion of the 100% insurance buy-in of the British Steel Pension Scheme securing a stable and assured outcome for all scheme members, after an earlier restructuring in 2017-18. 
  2. The proposed investment would reduce the Port Talbot site’s carbon emissions by around 5 million tonnes a year. 
  3. The project remains subject to all relevant information and consultation processes before decisions are made. Subject to informing and consulting, it is proposed that this new investment project could be operational within 36 months of the receipt of relevant regulatory and planning approvals. 
  4. Tata Steel will work to finalise the terms of the grant funding agreement with the UK Government and engage with the Welsh Government to seek requisite approvals and permits for the proposed project. The company will disclose any detailed transition and restructuring plans, in due course, subject to the outcome of all applicable consultation processes.
  5. Tata Steel will set up two centres for innovation at the Henry Royce Institute in Manchester and at Imperial College London. It will work with the UK Government and associated public bodies to supplement the research funding. Tata Steel already operates a research and development centre at the University of Warwick (co-located with Jaguar Land Rover’s automotive research centre and the Advanced Steel Research Centre) and also works closely with the Steel and Metals Institute at Swansea University.
Steelmaking at Port Talbot
Steel production in the UK
Frequently asked questions

 

1. What does the agreement between Tata Steel and the UK government mean for the future of the UK’s steel industry?
 

A: This announcement is a defining moment for the future of the UK steel industry and all the manufacturing, automotive, construction and engineering companies in the UK which are developing green steel-based solutions. The UK government’s support for the development of our decarbonisation pathway will secure a sustainable future for steelmaking in Port Talbot and the supply chains it serves. We look forward to working with all stakeholders to ensure the success of this project.
 

2. How does electric arc furnace technology work? 
 

A: Electric arc furnaces use high-current electricity to melt predominantly scrap steel.

The current iron and steel making processes at Port Talbot largely use iron ore, coal and other carbon-intensive fuels.

Using electric arc furnace technology, Tata Steel could reduce carbon emissions from its Port Talbot site by 5 million tonnes a year by 2030 – equivalent to the carbon footprint of almost 2 million homes in the UK (almost one in ten of all homes in England and Wales).
 

3. When will electric arc furnace technology be operational at Port Talbot and how much steel will it produce? 

A: The agreement with UK Government is subject to the finalisation of terms, due diligence, requisite approvals, and employee consultations, all of which will be undertaken in the coming months. Following this, electric arc furnace steelmaking would be operational at Port Talbot within 36 months of the receipt of relevant regulatory and planning approvals. The capacity of the new electric arc furnace would be around 3 million tonnes, similar to the output from the Port Talbot steelworks today.

4. How would these proposed changes impact on your employment levels? How many job losses might there be?
 

A: We recognise the transition to electric arc furnace steelmaking may require restructuring of our end-of-life, carbon-intensive and unsustainable heavy end assets at Port Talbot. We will begin discussions with our trade union partners and we will work hard to carry out any changes in a responsible manner. 

Any significant changes impacting our operational footprint will be fully consulted on, communicated and implemented in close cooperation with our trade union partners. We are committed to the communities and local areas we serve.
 

5. Your press release refers to ‘deep restructuring’ – what does this mean?
 

A: We recognise the transition to electric arc furnace steelmaking may require restructuring of our end-of-life, carbon-intensive and unsustainable heavy end assets at Port Talbot. We will begin discussions with our trade union partners and will work hard to carry out any changes in a responsible manner.
 

6. What is happening to your other sites in the UK? Could there be changes there too?
 

A: We have good downstream and distribution capability at other sites across the UK, processing and distributing products for carmakers, construction companies, packaging and engineering companies. 

We operate an extensive network of downstream production assets to meet the specific needs of our many customers in the UK and internationally. While the steelmaking process would change under the proposals we’ve announced, the output of the business will continue to flex to meet the prevailing needs of the market.
 

7. Why did you choose electric arc furnace technology over hydrogen or carbon capture?
 

A: We chose EAF technology for this proposal for a number of reasons. Firstly, the UK exports more steel scrap metal than every other country around the world, apart from the United States. We export 8 million tonnes a year, often to countries with lower environmental standards. So we have a plentiful and reliable supply of steel scrap here in the UK for EAF technology and it makes more sense to re-make it into new steel products here for British and other manufacturers.

Secondly, EAF technology is an incredibly well established and proven way of making high-quality steel. Steelmakers in the world’s largest economy, the United States, have invested heavily in new EAF steelmaking technology in recent years, and we’ve seen first-hand the dramatic developments they’ve made to enable them to produce some of the highest-quality steel grades for customers.

Thirdly, many of our existing ‘heavy end’ plants – such as blast furnaces and coke ovens – are reaching the end of their operational lifespans. Further investment in traditional blast furnaces is not financially or environmentally viable due to the increasing environmental and carbon costs. Additionally, investment cycles for new heavy end plants are typically more than 20 years, which means if we were to invest in new coke ovens or a blast furnace today, we would be committing to using coal to make steel beyond 2050. However, the UK government has made clear it wants to phase out the use of coal. More than any other technology, electric arc furnace technology is tried and tested, ready to fill the gap after our existing plants reach the end of their operations lives.
 

8: Is it true EAF-produced steel is of a lower quality than blast furnace-produced steel?
 

A: No. It is true to say that most of the steel produced around the world, including in Europe, is made using blast furnaces. Since 2008, however, there’s been a steelmaking revolution in the world’s largest economy, the United States, which has been investing predominantly in electric arc furnace technology. They’ve also arguably led the way in developing ways to produce more complex grades of steels using EAFs so it can be used in some of the most demanding end uses, including in the automotive industry. Looking closer to home, many of our European competitors have also chosen to invest in electric arc furnace technology.

As part of Tata Steel’s investment in the UK, we are looking to establish two new Centres for Innovation at the University of Manchester and Imperial College London. Working with world-leading academia, this multi-million pound investment will help us develop advanced materials for our customers. This will complement R&D we are already doing at the University of Warwick and Swansea University.
 

9: What support do you want from the Welsh Government in addition to UK Government investment.
 

A: The Welsh Government currently assist us on a wide range of policy areas including research and development, environmental protection, skills and employment and carbon leakage policies. The Welsh Government will now play an instrumental role in assisting us to build a sustainable future for the south Wales region.
 

10: How long will the consultation process and due diligence take?
 

A: We plan to start the consultation process with our trade union partners as soon as possible so that we can move forward with our plans for sustainable steelmaking in the UK. We are acutely conscious of our obligations to our employees, customers and suppliers, and the wider steelmaking community and will seek to carry out any changes in a responsible manner.