UK to provide £13.5 mln to support supply chain while Tata Steel transitions to green steelmaking at Port Talbot

The government said the funding was for “immediate release”  to support those local businesses that rely on Port Talbot steelworks by helping them turn toward new markets and customers. Details of exactly how to access the funds will be announced soon, the government added.

The money is the first tranche from the Tata Steel/Port Talbot Transition Board fund – a dedicated fund of £100 million to be invested in skills and regeneration programs to support workers directly and indirectly affected by Tata Steel’s plans for Port Talbot. The funding will help them to find new jobs where relevant, provide access to skills training and enable them to gain new qualifications.

Tata Steel Europe’s decarbonization plan for the Port Talbot steelworks includes the construction of a new 3.2 million tpy electric-arc furnace, with the total amount of the investment reaching £1.25 billion, including financial support from the UK government.

The decarbonization plan also includes the gradual closure of the two remaining blast furnaces at the Port Talbot steelworks. BF5 was closed on July 4 and BF4 will be closed by the end of September.

Tata Steel Europe said that it would provide £20 million of the total transition fund, while £80 million will come from the UK government.

A spokesman for Tata Steel Europe told Fastmarkets the company has already started spending some of its £20 million contribution on an employee support scheme – to help workers get formal accreditation for their skills by gaining National Vocational Qualifications (NVQs) and that it will soon appoint an outplacement support agency.

More than 50 companies, including Fintech Wales, The Royal Mint, Cardiff Metropolitan University, RWE Energy, Ledwood Mechanical Engineering, and Pro Steel Engineering, have committed to supporting workers forced to leave their jobs in the steelworks. According to the UK government, support includes guaranteed interviews for anyone made redundant, training and coaching. 

On August 1, TV Narendran, chief executive officer of India-headquartered parent company Tata Steel, confirmed the company’s intention to continue with its decarbonization plans for The Port Talbot steelworks.

“In the UK, we have safely ceased operations at one of the blast furnaces (BF5) at Port Talbot and are on track to close the remaining blast furnace by September 2024,” he said at the time.

And a Tata Steel Europe spokesman said that no hot metal will be produced at the site until the new EAF is up and running in 2028.

On August 15, the UK government’s Welsh Secretary, Jo Stevens, chaired the second meeting of the Tata Steel/Port Talbot Transition Board and said that, despite Tata Steel’s management being firm about its schedule for decommissioning, “negotiations with Tata Steel on the future of the site will continue.”

The UK Business & Trade Secretary, Jonathan Reynolds, said: “We’re working in partnership with trade unions and industry to secure a green steel transition that’s right for the economy, [for] our talented workforce and [for] local communities for generations to come.

“Our negotiations with Tata [Steel] remain ongoing.” he added.

And Tata Steel UK’s CEO Rajesh Nair, said: “The transition board [has a] very important role [to play] in supporting the transformation of our business to low-CO2 steelmaking and [in] encouraging regeneration and inward investment to the area, while [at the same time] helping to mitigate the impact those changes may have on our people, our supply chain and our communities.”

Pressure on UK HRC prices

The Port Talbot steelworks produces hot-rolled coil and, according to Tata Steel, the annual output of the new EAF will be equivalent to the combined output of the last two blast furnaces.

But the previous closures and the fact that no steel will be produced at the site from September “has led to an increase in imports consistently exhausting part of the quota for Category 1 steel [which includes hot rolled flat steel products] across four consecutive quarters,” according to the UK Trade Remedy Authority (TRA).

“This in turn has driven up the cost of these products for the UK market,” the TRA said.

To remedy this, the TRA, announced on August 9, that the import quota for flat steel products will be almost tripled due to the “changed circumstances” in the market, with particular reference to the blast furnace shutdowns at Port Talbot.

The current quota of 1 million tonnes per year for Category 1 steel, will be expanded to 2.9 million tpy, by dividing Category 1 into two subcategories – 1A and 1B – to reflect whether the interested parties want to import material for commercial applications (1A) or for downstream processing (1B).

The quota Category 1A – which covers the steel commonly used as a raw material for other types of steel – will be set at 1 million tpy.

The quota for Category 1B – steel that has been subject to further downstream processing – will be set at 1.9 million tpy.

The TRA said that if limits are breached, importers will need to pay a 25% tariff. 

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