Tata Steel UK’s £1.25 billion investment in Port Talbot
The landmark approval of Tata Steel UK’s state-of-the-art electric arc furnace (EAF) project in Port Talbot, confirmed by Neath Port Talbot County Borough Council, marks the most significant investment in the UK steel industry in decades. This £1.25 billion commitment will ensure high-quality steel production, preserve thousands of jobs, and secure the long-term future of steelmaking in South Wales.
Rajesh Nair, CEO of Tata Steel UK, emphasized the company’s commitment to building a greener future: “We are very pleased to have secured approval to build sustainable steelmaking in Port Talbot. We are committed to begin large-scale work on site this summer, ahead of the electric arc furnace starting up from the end of 2027.”
The industry response has been overwhelmingly positive, with Gareth Stace, Director General of UK Steel, highlighting the importance of this milestone: “This bold investment underscores Tata Steel UK’s leadership and commitment to sustainability, innovation, and the long-term success of the UK steel sector. The positive impact will be felt across the industry, the local community, and the broader UK economy.”
As the steel industry navigates challenging transitions, this development marks a clear step towards greener, more efficient steel production, setting a benchmark for sustainability and resilience in the sector.
Source: tatasteeluk.com
Tata Steel UK starts decommissioning of equipment at Port Talbot
Tata Steel UK, a subsidiary of India-based steelmaker Tata Steel Limited, has announced that it has started to dismantle its Port Talbot plant, including the converters and supporting structures, in line with the transitioning of the plant to electric arc furnace-based steel production.
Some of the equipment is being renovated for use in the new production process.
The company is also investing in two new ladle metallurgy furnaces to enhance the quality of finished steel. These furnaces will enable the company to meet the most demanding product specifications and customer requirements, ensuring its competitiveness going forward.
In October last year, the company ordered an electric arc furnace (EAF) and other state-of-the art steelmaking equipment from Italy-based Tenova, a Techint Group company specialized in innovative solutions for the metals and mining industries, for the decarbonization of its Port Talbot plant, as SteelOrbis previously reported.
Tata Steel UK to supply JCB with green steel
The green steel would be produced at Tata’s site at Port Talbot in South Wales which is set to undergo a £1.25 billion ($1.58 billion) overhaul.
The steelmaker added that this was the first supply agreement it had made since the announcement of the transformation of the Port Talbot site.
The project includes building a new 3-million-tonne per year electric arc furnace (EAF), which offers a low-carbon alternative to the traditional blast furnace method.
The EAF is expected to be functional at the end of 2027, thus, replacing the two blast furnaces, which were operational a few months ago.
BF5 was closed in July this year, and BF4 was closed in September.
The Port Talbot site produced mainly hot-rolled coil and cold-rolled coil.
The company managed to receive a support package of £500 million from the UK government to fuel its plan to develop a lower-emissions electric-arc furnace-based steelmaking plant.
Tata Steel UK added that JBC is focused on carbon reduction in its manufacturing and will integrate the steel into its machinery range.
“We are fully supportive of Tata Steel UK’s investment proposals and are pleased to be one of the first customers to endorse those plans by making this agreement to secure British-made green steel as soon as it is available,” Wayne Asprey, JBC’s group purchasing director, said.
Market overview
Demand for green flat steel in Europe is still limited and highly regionalized, but premiums for such material have strengthened slightly on a weekly basis because most suppliers refuse to undercut prices much even in the face of low demand, Fastmarkets reported.
According to industry sources, most demand for green steel was coming from the Nordic states.
Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel.”
Leading European suppliers kept the premiums for such steel at €200-350 per tonne, sources told Fastmarkets.
During the assessment week to December 12, buyer sources estimated achievable premiums for green steel with such level of emissions at €50-120 per tonne, although the lower end of that range was not considered workable by mill sources.
Even slightly higher bids, reaching at €70 per tonne, have been rejected.
As a result, Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €100-200 per tonne on December12, narrowing upward by €20 per tonne from €80-200 per tonne seven days earlier.
But the green steel premium in Northern Europe averaged €145 per tonne in November, compared to €200 per tonne in January this year.
According to industry sources, the lack of willingness to pay premiums for steel with reduced carbon emissions content was partially explained by the unfavorable economic situation in Europe.
Tata Steel signs contract for new EAF at Port Talbot site
The new EAF, expected to become operational at the end of 2027, will have a capacity for 3 million tonnes per year of steel.
By transitioning to the new EAF technology, the Port Talbot site will be able to produce green steel, Tata Steel said. It will reduce its carbon emissions by 90%, which is equivalent to 5 million tonnes of CO2 per year, the company added.
According to the company, the use of scrap in the new EAF will also reduce the UK’s reliance on imported iron ore.
The new EAF will be funded by a joint investment of Tata Steel and the UK government reaching £1.25 billion ($1.62 billion). Tata Steel will provide £750 million of the whole sum, and the investment of the UK government will be up to £500 million.
The grant from the UK government was approved on September 11.
The new EAF is supposed to replace the two blast furnaces (BFs) at the Port Talbot site, which were operational until recently. The two BFs had a capacity for 5 million tpy, but the company did not use the whole of it and explained that the annual output from the two BFs did not exceed 3 million tpy.
BF5 was closed in July this year, and BF4 was closed in September.
The Port Talbot site produced mainly hot-rolled coil and cold-rolled coil.
According to the contract with Tenova, the Port Talbot site will also receive new ladle metallurgy furnaces, which will allow the production of more complex grades required by manufacturers in the UK and other countries.
“Today marks an important milestone in making low-CO2 steelmaking a reality in Port Talbot, as well as reducing the UK’s carbon emissions and supporting our customers with their own carbon reduction targets,” T V Narendran, chief executive officer of Tata Steel, said during the signing of the contract.
“Technology like the furnaces made by Tenova is critical to decarbonizing the industry, unlocking its potential to provide skilled jobs and creating economic stability for future generations of steelworkers in South Wales,” Jonathan Reynolds, UK Business and Trade Secretary, said.
UK steel sector will face increased demand for scrap
Tata Steel’s new EAF will recycle 2 million-2.5 million tonnes of UK-sourced scrap every year — equivalent to about 2.5 million cars or 250 Eiffel Towers, the company said.
Using predominantly UK-produced scrap means that the company would need to buy high-quality scrap grades with lower impurities that are suitable for flat steel production.
The UK is a net scrap exporter, but with new EAF-based steelmaking capacities coming online, it could become an importer of certain grades, sources suggested.
Another UK steel producer, British Steel also plans to switch to EAF by 2025.
UK to provide £13.5 mln to support supply chain while Tata Steel transitions to green steelmaking at Port Talbot
The government said the funding was for “immediate release” to support those local businesses that rely on Port Talbot steelworks by helping them turn toward new markets and customers. Details of exactly how to access the funds will be announced soon, the government added.
The money is the first tranche from the Tata Steel/Port Talbot Transition Board fund – a dedicated fund of £100 million to be invested in skills and regeneration programs to support workers directly and indirectly affected by Tata Steel’s plans for Port Talbot. The funding will help them to find new jobs where relevant, provide access to skills training and enable them to gain new qualifications.
Tata Steel Europe’s decarbonization plan for the Port Talbot steelworks includes the construction of a new 3.2 million tpy electric-arc furnace, with the total amount of the investment reaching £1.25 billion, including financial support from the UK government.
The decarbonization plan also includes the gradual closure of the two remaining blast furnaces at the Port Talbot steelworks. BF5 was closed on July 4 and BF4 will be closed by the end of September.
Tata Steel Europe said that it would provide £20 million of the total transition fund, while £80 million will come from the UK government.
A spokesman for Tata Steel Europe told Fastmarkets the company has already started spending some of its £20 million contribution on an employee support scheme – to help workers get formal accreditation for their skills by gaining National Vocational Qualifications (NVQs) and that it will soon appoint an outplacement support agency.
More than 50 companies, including Fintech Wales, The Royal Mint, Cardiff Metropolitan University, RWE Energy, Ledwood Mechanical Engineering, and Pro Steel Engineering, have committed to supporting workers forced to leave their jobs in the steelworks. According to the UK government, support includes guaranteed interviews for anyone made redundant, training and coaching.
On August 1, TV Narendran, chief executive officer of India-headquartered parent company Tata Steel, confirmed the company’s intention to continue with its decarbonization plans for The Port Talbot steelworks.
“In the UK, we have safely ceased operations at one of the blast furnaces (BF5) at Port Talbot and are on track to close the remaining blast furnace by September 2024,” he said at the time.
And a Tata Steel Europe spokesman said that no hot metal will be produced at the site until the new EAF is up and running in 2028.
On August 15, the UK government’s Welsh Secretary, Jo Stevens, chaired the second meeting of the Tata Steel/Port Talbot Transition Board and said that, despite Tata Steel’s management being firm about its schedule for decommissioning, “negotiations with Tata Steel on the future of the site will continue.”
The UK Business & Trade Secretary, Jonathan Reynolds, said: “We’re working in partnership with trade unions and industry to secure a green steel transition that’s right for the economy, [for] our talented workforce and [for] local communities for generations to come.
“Our negotiations with Tata [Steel] remain ongoing.” he added.
And Tata Steel UK’s CEO Rajesh Nair, said: “The transition board [has a] very important role [to play] in supporting the transformation of our business to low-CO2 steelmaking and [in] encouraging regeneration and inward investment to the area, while [at the same time] helping to mitigate the impact those changes may have on our people, our supply chain and our communities.”
Pressure on UK HRC prices
The Port Talbot steelworks produces hot-rolled coil and, according to Tata Steel, the annual output of the new EAF will be equivalent to the combined output of the last two blast furnaces.
But the previous closures and the fact that no steel will be produced at the site from September “has led to an increase in imports consistently exhausting part of the quota for Category 1 steel [which includes hot rolled flat steel products] across four consecutive quarters,” according to the UK Trade Remedy Authority (TRA).
“This in turn has driven up the cost of these products for the UK market,” the TRA said.
To remedy this, the TRA, announced on August 9, that the import quota for flat steel products will be almost tripled due to the “changed circumstances” in the market, with particular reference to the blast furnace shutdowns at Port Talbot.
The current quota of 1 million tonnes per year for Category 1 steel, will be expanded to 2.9 million tpy, by dividing Category 1 into two subcategories – 1A and 1B – to reflect whether the interested parties want to import material for commercial applications (1A) or for downstream processing (1B).
The quota Category 1A – which covers the steel commonly used as a raw material for other types of steel – will be set at 1 million tpy.
The quota for Category 1B – steel that has been subject to further downstream processing – will be set at 1.9 million tpy.
The TRA said that if limits are breached, importers will need to pay a 25% tariff.
UK TRA proposes increasing HRC import quota citing Tata Steel UK production drop
The UK Trade Remedies Authority has proposed an increase to the import quota for hot-rolled flat products as changes in circumstance, including the recent closure of a blast furnace at Tata Steel UK’s Port Talbot works, have decreased domestic production of these products, it said Aug. 9.
Under the proposal, the current quota volumes for steel used for commercial applications will be maintained, while the TRA would create a new quota accessible for downstream processing, it said.
The TRA has proposed that the category for hot-rolled flat products, known as Category 1, be split into two segments, Categories 1A and 1B. The quota for Category 1A, which would be accessible by parties looking to import the products for commercial applications will be retained at current levels, or just over 1 million metric tons/year.
The quota for Category 1B, which would be accessible solely for downstream processing, however, will be set 89% higher than that of Category 1A, to around 1.9 million mt annually. This means the total Category 1 category for hot-rolled flat products will be increased to 2.9 million mt.
The TRA also has proposed for the Category 1B quota to be allocated on a global basis “to allow companies to establish reliable supply chains for domestic processing,” along with a cap in the range of 37%-42% to ensure the quota is not dominated by a single country.
“Our proposal today is designed to deal with the reduction in production of hot-rolled flat steel at Port Talbot,” the TRA said. “These changes have resulted in higher imports and parts of the current quota being exhausted, creating uncertainty and driving up costs for steel users.”
Tata Steel is the UK’s sole HRC producer.
Platts, part of S&P Global Commodity Insights, last assessed UK HRC at GBP575/mt basis DDP West Midlands Aug. 8.
Justine Coyne
UK government disadvantages Tata Steel
The UK government is putting Tata Steel at a disadvantage compared with its European peers with the comparatively low level of funding it is providing to help the company decarbonise.
The government has committed to provide Tata with £500mn ($635mn) towards the cost of decarbonising its Port Talbot plant in South Wales, which will have an electric arc furnace with a capacity of about 3mn t. This equates to £166/t worth of assistance.
That level of funding would be insufficient to enable other technologies such as two electric arc furnaces or direct reduced iron. Tata itself is investing £700mn in the move, which has widely been criticised by unions and the Labour opposition as a “bad deal”.
In comparison, the German government is giving Salzgitter more than €525/t ($568.80/t) to facilitate its movement to hydrogen-fed green steel. Germany’s ThyssenKrupp will receive almost €870/t to help it transition to green steel at its flagship Duisburg site.
ArcelorMittal is receiving more than €600/t to help decarbonise its Sestao plant in Spain. At its Dunkerque site in France, it has received funding of €850mn to produce 4mn t of lower-carbon steel, equating to €212/t worth of financial assistance. Therefore, most European competitors are receiving greater state assistance.
To feed its electric arc furnace, Tata will still need to import direct reduced iron, pig iron or other metallics to complement the reservoir of domestic scrap. Sources suggest this could be as much as 1mn t/yr.
Should UK electricity prices remain high compared with Europe, there is a risk Tata’s electric arc furnace will still struggle to compete, although the reduction in fixed costs from job cuts and the ability to adjust output quickly will be financially beneficial.
“This steel plant was losing more than £1mn a day, putting it at risk of closure and threatening 8,000 jobs in South Wales and thousands more in the wider supply chain,” a government spokesperson said.
“The government’s unprecedented £500mn grant as part of the £1.25bn investment by Tata Steel will build a new electric arc furnace that protects thousands of long-term jobs, as well as delivering a much greener way of producing steel, cutting carbon emissions in Wales by 22pc.”
