Tata Ops Closure to Hit UK’s Supply Chain
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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