Tata Steel close to agreement with UK government on funds for Port Talbot

A decision on UK government funding for the decarbonization of Tata Steel’s operations in the country is close to being reached, according to UK media reports and the local unions, which late Sept. 13 expressed anger at being left out of the negotiations.

While the UK government has declined to comment “on ongoing live negotiations” unions said that not only was the intervention “long overdue, but imposing a program without proper worker consultation is unacceptable.”

Tata UK, part of India’s Tata Steel group, is in talks with the UK government to secure funds to help the mill in its transition towards a much lower carbon intensity production, switching its blast furnace steelworks at Port Talbot in south Wales to electric arc furnace based production.

The switch to EAF based production is expected to cost up to GBP1.2 billion ($1.5 billion) with the company looking to secure around GBP500 million in subsidy. However, the switch would lead to redundancies as EAFs need fewer workers to run.

“GMB has urged ministers and Tata Steel to have a longer-term view on the decarbonization of steel. It is not a just transition if thousands of jobs are sacrificed in the name of decarbonization on the cheap,” the GMB union’s Charlotte Brumpton-Childs said.

“We wholeheartedly support the move to modernize and decarbonize the industry, in fact we have sought this type of investment for years. But ignoring technologies outside of Electric Arc Furnaces will mean tens of thousands of people will lose their livelihoods.”

A Tata Steel spokesperson told S&P Global Commodity Insights that “Tata Steel is continuing to discuss with the UK government a framework for continuity and decarbonization of steel-making.”

He gave no details on the timing on a decision but stressed that “any significant change is only possible with government investment and support, as also seen in other steel-making countries in Europe where governments are actively supporting companies in decarbonizing initiatives.”

The steel industry is responsible for around 5% of CO2 emissions in the EU and 7-8% globally. In Europe several projects have been announced to cut carbon emissions by 55% by 2030 and reach climate neutrality by 2050.

In Europe, Tata Steel is one of the largest steel producers, with two operating steel-manufacturing facilities — Port Talbot in the UK, which has a capacity of 5 million mt/year and the other IJmuiden in Netherlands with a capacity of 7.5 million mt/year. Both facilities produce flat steel products.

In October 2021 Tata Steel separated its UK and Netherlands operations into Tata Steel UK and Tata Steel Netherlands, which operate as two independent companies.

In the UK, steel production accounts for 2.7% of UK emissions. Over 80% of UK steel is made via the blast furnace route at Tata Stee’s Port Talbot and British Steel’s Scunthorpe plant, which together produce 5.9 million mt/year of steel and are responsible for 95% of emissions from steelmaking in the UK, according to a UK government report. The three main technology pathways likely to help UK steel-making reach net zero are: electric arc furnaces using recycled scrap steel; direct reduced iron using green hydrogen; and using carbon capture, utilization and storage (CCUS) technology with existing steelmaking infrastructure.

Author Annalisa Villa