India’s Tata Sons, the holding company of Tata Steel, is mulling the option of exiting the latter’s steel business in the UK as hopes of receiving a £1.5 billion subsidy from the UK government recedes, industry sources said on Monday, October 17.
Tata Steel had sought fiscal subsidies from the UK government to replace its carbon-intensive blast furnaces with electric arc furnaces at its steel mills, but has not received any favorable response and is now considering various options of exiting the business in that country, the sources familiar with the developments said.
Though there has not been any official comment from the company, the sources said that discussions on the need for subsidies have been continued for over two years, but it seems that the Liz Truss-led UK government is not willing to offer such subsidies to replace furnaces at Tata Steel’s Port Talbot steel mill which has a 5 million mt per year capacity.
A Tata Steel spokesperson, however, in a media statement said that the company is not currently in talks with any potential buyer for the Port Talbot mill.
Tata Steel is seeking two kinds of support from the UK government: firstly, support for transitioning to green steel production and ensuring cost competitiveness at the same time, and, secondly, through partnership in financing such projects.
Industry analysts have estimated such a transition for the Port Talbot mill would require a fresh investment of around £3 billion, but without government financial aid, the UK business portfolio did not justify such large funds infusion by Tata Steel, by itself.
Tata Steel CEO, T V Narendran, in a media interview earlier stated, “There are justifications for running the business given its current performance, but it does not justify investing such large capital expenditures.”