India’s Tata Steel Ltd, Britain’s largest steelmaker, has put its entire UK business up for sale to stem heavy losses, a move that would draw a line under its almost decade-long foray into Britain’s declining steel industry.
After a marathon board meeting in Mumbai, the steel giant said the financial performance of its UK arm had deteriorated sharply in recent months, following years of weak conditions that have already forced it to shed hundreds of jobs.
Blaming high manufacturing costs, domestic market weakness and increased imports into Europe from countries like China, Tata saw little change in the competitive position of its UK operations, which employ about 15,000 people and include Port Talbot, Britain’s largest steel plant.
Photo: Reuters
As a result, Tata said in a statement its European arm would “explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts.”
“Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe Board will be advised to evaluate and implement the most feasible option in a time-bound manner,” it added.
Tata Steel bought Anglo-Dutch steelmaker Corus Group PLC in 2007 and has since struggled to turn the giant around.
The company said it remained in talks with the UK government, which has expressed concern about job losses in the industry. Port Talbot, though far from its 1960s peak, still employs about 4,000 people, and Tata is one of the most significant private companies in Wales.
The opposition Labour Party called on the government to save an industry it described as “the cornerstone of our manufacturing sector.”
Labour leader Jeremy Corbyn suggested a partial nationalization of the steel industry if necessary.
The government has said it is ready to work with Tata.
Most steel companies, including top producer ArcelorMittal SA, have been hit by plunging prices due to overcapacity in China, the world’s biggest market for the alloy, making Tata’s task of finding a buyer all the more difficult.
Tata Steel is the second-largest steel producer in Europe, with a diversified presence across the continent. It has a crude steel annual production capacity of more than 18 million tonnes in Europe, but only 14 million tonnes is operational.
Two of its three main units, Port Talbot and Scunthorpe, are in Britain, with the remaining operations in the Netherlands.
For the year ending March last year, the company took a write-down of a little more than US$1 billion in its consolidated numbers.
However, the tide seems to be turning for the India operations, and many analysts expect it to post an improved operating profit from the next fiscal year.
Tata also said in its statement that it was still in talks with investment firm Greybull Capital LLP over the sale of its British long products unit, which makes steel for use in construction.
Talks with Greybull were announced last year.
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