On Friday, Tata Steel and the UK government jointly pledged £1.25 billion in investments to upgrade the Port Talbot plant’s coal-based electric arc furnace (EAF) to a lower-emission model.
While the UK government will give up to £500 million, Tata Steel would invest around £700 million over the course of the following four years from internal accruals in the steel manufacturing plant that will be built in Port Talbot. Over a ten-year period, the new electric furnaces will contribute to a 50 million tonne reduction in emissions. The business intends to construct a 3-million-tonne EAF at Talbot.
The government is attempting to replace the polluting blast furnaces at Port Talbot Steelworks, which is the UK’s single largest source of carbon emissions. According to reports, the funds would be used to support the construction of a new EAF at Tata Steel’s Port Talbot factory, protecting 5,000 of the more than 8,000 jobs there. However, because the lower-carbon electric furnaces require less manpower, it increases the possibility of 3,000 job losses. “The project marks the industry’s first significant step towards decarbonization in the UK. As the facility would use locally accessible scrap steel, this would help strengthen that nation’s security in terms of its supply of steel, according to a statement from Tata Steel.
The deal with the UK Government, according to Tata Group Chairman N Chandrasekaran, “is a defining moment for the future of the steel industry and indeed the entire value chain in the UK. Working on the proposed transition pathway for the future of sustainable steelmaking in the UK with His Majesty’s government and the Honourable Prime Minister Rishi Sunak has been an incredible delight.
“The proposed investment will preserve a significant amount of employment and presents a great opportunity for the development of a green technology-based industrial ecosystem in South Wales,” he continued.
The planned project will keep steel production going at Port Talbot and turn Tata Steel UK into a long-lasting, capital-effective, and successful company. The project has a “robust” investment case with the backing of the UK government, the statement continued. Many of the current assets, including blast furnaces and coke ovens, are nearing the end of their useful lives and Tata Steel UK will soon begin consultation on the proposal and the transition period.
Tata Steel also declared plans to establish two more Centres of Innovation & Technology in the UK with an estimated £20 million investment spread over four years. These centres would be established at Imperial College London for research in Sustainable Design & Manufacturing and at the Henry Royce Institute in Manchester for research on advanced materials.
Tata Steel CFO Koushik Chatterjee later stated on an analysts’ call that the EAF would save the company between £150 and $170 per tonne in fixed, employee, and raw material expenses. The Talbot facility owned by Tata Steel was nearing the end of its useful life, and the firm was negotiating with the UK government to extend it with a decarbonization grant.
