Tata Ops Clo­sure to Hit UK’s Sup­ply Chain

The Economic Times - - Around The World - ANDY BRUCE & COSTAS PI­TAS

Port Tal­bot, Wales | Lon­don: The closu re of Tata Steel’s op­er­a­tions in Bri­tain would leave a hole in man­u­fac­tur­ers’ sup­ply chains, deal­ing a blow to thou­sands of smaller firms across the coun­try and creat­ing a lo­gis­ti­cal headache for the car in­dus­try.

Tata Steel, Bri­tain’s big­gest pro­ducer, put all of its op­er­a­tions up for sale, in­clud­ing the coun­try’s largest steel­works at Port Tal­bot which is los­ing $1.4 mil­lion a day due to de­pressed steel prices and high costs.

As the gov­ern­ment searches for a new buyer, some of Tata’s cus­tomers are al­ready look­ing for new­source­sof­s­teel­whichis­used in ev­ery­thing from car roofs to Heinz baked bean cans, cladding on Ikea build­ings and some of the coun­try’s coins. While big­ger names have the lux­ury of a global sup­ply chain to fall back on, smaller com­pa­nies — which ac­count for around 95% of Bri­tish man­u­fac­tur­ing firms — face a tougher task if Port Tal­bot in south Wales closes.

Tatasell­saround­hal­fofit­sprod­ucts into the do­mes­tic mar­ket, the firm said in 2014.

“It would be en­tirely un­de­sir­able from my point of view,” said Tony Mullins, ex­ec­u­tive chair­man of QRL Ra­di­a­tors Group, a

Tata Steel cus­tomer that makes heat­ing ra­di­a­tors near the Welsh town of New­port, em­ploy­ing

around 150 staff.

Look­ing abroad for steel would leave firms like QRL that use Bri­tish steel ex­posed to swings in the cur­rency ex­change rate and higher trans­porta­tion costs. It might also need to hold more stock if it is buy­ing from the other side of the world, hav­ing an im­pact on work­ing cap­i­tal. “We have to be com­pet­i­tive, we have to pro­duce qual­ity prod­ucts, and his­tor­i­cally with Tata that has been pos­si­ble for us,” Mullins said.

The­gov­ern­ment­main­tain­sthat the main prob­lem is the col­lapse in the price of steel. China has flooded Euro­pean mar­kets with rel­a­tively cheap steel as a re­sult of its own fall­ing de­mand. Five car­mak­ers built al­most 99% of Bri­tain’s 1.6 mil­lion cars last year and all source steel from Port Tal­bot, with some al­ready look­ing for al­ter­na­tives should the site shut.

Rollo Reid, tech­ni­cal di­rec­tor and grand­son of the founder of REI­Ds­teel, one of Bri­tain’s largest steel con­struc­tion com­pa­nies which sources al­most 90% of its steel from Tata, wor­ries that if Port Tal­bot closes, prices will rise.

“There will be one less com­peti­tor and when the other Euro­pean ones go out of busi­ness, there will be less com­peti­tors and then the price will go up and we’ll be com­pletely within the hands of the Chi­nese.”

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