- 14 Oct 2022
- ICICIdirect Research
Tata Steel eyess exit from UK steel business in absence of supportTATASTEEL - 102 Change: -2.80 (-2.67 %)
As per media sources, Tata sons is considering Tata Steel’s exit from its UK business with little hope of a subsidy package for the proposed transition to green energy from the British government. The funding is needed to replace the carbon-intensive blast furnaces with electric arc furnaces over the next few years to keep the plant operational..
Currently, the company is in active and detailed discussions with the UK government and is not currently in any discussions with potential buyers for the UK business. Tata Steel is seeking support from the UK government in two forms. First, through policy by encouraging transition to green steel and ensuring a cost-competitive landscape and second through partnership in financing of the project, given the size of investment and the financially constrained position of Tata Steel's UK business. Industry sources indicate, without UK government support, Tata Steel would even consider closing UK’s steel unit. Tata Steel’s UK operations have structural disadvantages such as higher energy costs as well as the lack of a pellet plant and sufficient coking oven capacity. Hence, its costs are relatively elevated compared to Tata Steel’s Netherland operations. Currently, no final decision has been taken. Hence, going forward, any decision Tata Steel takes on the UK operations would remain a key monitorable.