Tata Steel boss tells Senedd ‘why Port Talbot blast furnaces have to close’

Martin Shipton

The head of Tata Steel UK has dashed the hopes of workers and politicians by saying the only future for steelmaking in Port Talbot involves closing down the plant’s two blast furnaces and the loss of 2,800 jobs.

Rajesh Nair explained the group’s reasoning at a meeting of the Senedd’s Economy, Trade and Rural Affairs Committee.

He was speaking less than 24 hours after MSs unanimously gave support to an alternative plan put forward by unions that would see one of the blast furnaces retained pending the introduction of a greener kind of steel production in the form of an electric arc furnace.

Tata Steel has been offered £500m by the UK Government to develop a more environmentally friendly electric arc furnace at the Port Talbot site.

Financial

Asked by committee chair Paul Davies whether the decision to close down the blast furnaces was purely financial, Mr Nair said: “We are towards the end of the life of most of the assets we have in Port Talbot, particularly at the heavy end – the blast furnaces and the steelmaking shops.

“As we get to the end of the life cycle of the assets, the predictability of these assets is compromised. Despite all the efforts of our people – their motivation and their passion – and the money that we are putting into it, the reliability of the assets is compromised. That also compromises our commitment to our workforce to ensure safe and reliable operations, and also compromises our ability to honour our commitment to our customers to ensure reliable, quality, timely delivery.”

Turning to the plant’s financial situation, Mr Nair said: “Over the past few years the business has been losing a tremendous amount of money. You’ve heard about the last quarter announcement where the business turned a loss of about £160m.

“And for the first nine months of this financial year, it’s about £330m. If nothing else were to go wrong and if everything else were to be in the same state of affairs, which we know it will not be, we are likely to turn out a loss of nearly £500m – that’s half a billion of loss in just one year. This is just not sustainable or viable for any company to handle.

“The third important point is the operation of the blast furnaces. You are all probably aware of our proposal which is to shut down the blast furnaces and the steel shop. A fundamental piece of the multi-union proposal was to run at least one blast furnace – they were accepting that one of the blast furnaces and the coke ovens need to be shut down because of the impact it has on the business and the nature of the asset.

“Essentially it was running one blast furnace all the way to the transition. I just want to clarify that our proposal involves building an EAF [electric arc furnace], which is the main part of our proposal, inside an operating steel shop. That has been done to make sure that the proposals work in a manner where we utilise our assets most efficiently. So getting to run this steel shop is the most critical part. If we build the steel shop we will not be able to build the electric arc furnace.

“Even if we were to take that on board and run the steel shop to the transition, we would have to go back to the layout we have designed. The layout has been designed to optimise efficiencies, to reduce complexity and to improve the cost position of the company. Going back on the layout significantly compromises our ability in the future to have a steel facility which is designed on the principles of efficiency, reducing complexity and cost. So we would basically compromise the future by even considering the option of trying to build a new steel facility inside an existing steel shop.

“Going further, even if we were to compromise the layouts, we would come very shortly to a time where we would just not be able to build the new asset in a steel shop which is operating with nearly 320 tonnes of hot metal and liquid steel that is moving around in the shop. We are looking to build a huge EAF steel facility inside that bay which is then fraught with a tremendous amount of safety risks, operational risks and costs.

“So these are the three fundamental reasons [for our proposal], and even if you were to ignore everything else, the fact that we would have to build in an existing shop – the basic analysis which the unions have also been made privy to – has a further impact of nearly £200m on the costs, from a £600m which is already worse off if you were to run a single blast furnace instead of shutting it down, And it further delays our projects by nearly 10 months. This is the background against which we are looking to consult on these proposals and move forward. The key thing is that there is urgency and we need to move at pace if we want to get this transition done in a manner in which we secure steelmaking in Port Talbot and the UK.”

The closure of the blast furnaces would also affect workers in Llanwern in Newport, Shotton in Flintshire, Trostre in Carmarthenshire and Swansea University, as well as several sites in England.

Deeply disheartening

Mr Davies issued a statement after the committee meeting which said: :“Today’s session with Tata Steel bosses is deeply disheartening and devastating for Wales’ steel industry.

“Despite huge opposition, and the terrible effects the closure of the blast furnaces will have on the workforce, their families and communities across south Wales, Tata are unequivocal and are not listening.

“This week the whole Senedd unanimously agreed that there is a viable future for the blast furnace – this has been completely ignored.

“Today we are calling on Tata to reconsider their position and to keep the blast furnace open.”