UK offer to Tata Steel unit to decarbonise operations falls far short of its demand

Tata Steel is the largest steelmaker in the UK, with primary steelmaking at Port Talbot in South Wales.

tata steel UK
Notably, Tata Steel is seeking £1.5 billion from the UK government to execute its decarbonisation plans.

The British government’s offer of around £300 million to Tata Steel’s UK business, to decarbonise its operations, falls far short of the steel major’s demand of £1.5-billion aid. When contacted, a Tata Steel official, however, declined to comment on it. He said the company is currently evaluating the British government’s support package plans and that it will take some time to arrive at a final decision on the proposed package.

Tata Steel is the largest steelmaker in the UK, with primary steelmaking at Port Talbot in South Wales. Tata Steel UK (TSUK) has an annual crude steel capacity of 5 million tone (mt) and it employs more than 8,000 people. It supplies steel products to demanding markets, including construction and infrastructure, automotive, packaging and engineering.

According to The Financial Times, British Chancellor of the Exchequer Jeremy Hunt is poised to sign off a support package for Tata Steel UK and British Steel, in a move that will be tied to Britain’s two biggest steel manufacturers switching to green technology. “The funding for British Steel and Tata Steel UK is likely to be unveiled by the chancellor, Jeremy Hunt, this week. Each is expected to receive around £300 million of grants to help pay for a switch away from coal-fired blast furnaces and help with energy costs,” BBC reported.

Notably, Tata Steel is seeking £1.5 billion from the UK government to execute its decarbonisation plans. The company in the UK has the ambition to produce net-zero steel by 2050 at the latest, and to have reduced 30% of its CO2 emissions by 2030.

“Both Tata Steel UK and Tata Steel Netherlands have been developing detailed plans for transition to low CO2 technologies in line with our ambition to produce CO2-neutral steel by 2050 in Europe,” the steel major had said in its annual report for 2021-22.

“Finalisation of decarbonisation roadmap for Tata Steel UK, focusing on utilisation of locally available steel scrap (the UK is the second highest producer in the world) in consultation with the UK Government,” according to the annual report.

Tata Steel is reportedly seeking support from the UK government in two forms: In policy terms, by encouraging the transition to green steel and ensuring a cost-competitive landscape, and partnership in financing of the project, given the size of investment and the financially constrained position of the company’s UK business.

Liquid steel production at Port Talbot Steel Works, Wales during the FY2021-22 stood at 3.5 mt, which was 0.2 mt higher than the previous year. Production during FY20-21 was partly impacted by demand reductions associated with the Covid-19 pandemic. During FY 2021-22, TSUK commissioned a new turbine within the power plant with capability of 30 Mwe internal power generation helping to reduce the reliance on external energy purchases.

Interestingly, the UK Government set out plans to secure ‘clean and affordable’ energy in its Energy Security Strategy earlier this year. Achieving greater self-sufficiency has become vital after global events led to rocketing energy prices and significant government interventions in the energy market to cap prices.

New research from Tata Steel reveals that more than 5 million tonne of steel will be needed to build thousands of wind turbines at sea by 2030. Planned solar and nuclear power plants, which would power a future Britain, are expected to require about 3.5 million tonne of steel over the coming years.

An estimated 1.5 mt of steel will be needed to build the infrastructure for hydrogen production and distribution as well as large-scale carbon capture (CCS) projects. And the metal will also be needed to unlock new sources of oil and gas from the North Sea.

Henrik Adam, chairman of Tata Steel UK, said, “Recent events have shown us just how crucial it is to have a secure energy supply. Achieving this will need an energy revolution in this country requiring millions of tonnes of steel to build new energy generation projects.”

UK steelmakers, like Tata Steel, want to be part of this revolution, such as by developing new steel products for solar farms or for floating offshore wind structures, Adam said, adding a strong domestic and secure steel industry is also fundamental to delivering the UK government’s ambitious energy plans.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 25-01-2023 at 07:32 IST
Exit mobile version