Steel giants close in on merger to ease job fears

Tie-up between Tata and Thyssenkrupp likely to secure 8,500 UK roles in face of American tariffs

TATA and Thyssenkrupp are closing in on the final terms of a merger set to guarantee thousands of UK steel industry jobs.

Lawyers for the two companies were understood last night to be thrashing out final details on the tie-up, which will create a £13bn steel giant better able to compete in the increasingly tough global industry.

An announcement had been expected soon after markets closed yesterday, but sources close to the deal say it became hung up on last-minute questions over how the companies will be valued. However, the expectation is that an agreement will come with guarantees to protect the jobs of Tata’s 8,500 steelworkers in the UK well into the next decade.

Industry sources say the terms of the deal go beyond assurances given last year about Tata’s steel production in the UK, which promised to maintain production at the company’s giant Port Talbot plant until 2021. Port Talbot is the focus of Tata’s steelmaking operations in Britain, employing the largest slice of the company’s UK staff.

Led by steelworkers’ union Community and backed by peers Unite and GMB, workers’ groups have fought hard to protect British interests in the merged business.

It is understood that they have secured agreements for “significant” investment across Tata’s UK operations, including repair works on the Number 5 blast furnace at Port Talbot, meaning it could produce steel until 2026.

There is also thought to be a commitment that there will be no compulsory redundancies for the next eight years, and for the first £200m of operating profits to be reinvested.

A memorandum of understanding between Indian-owned Tata of a merger of its European operations with Thyssenkrupp was signed in September. Focused on three main hubs – Ijmuiden in the Netherlands, Duisburg in Germany and Port Talbot in South Wales – the tie-up is expected to lead to about 4,000 redundancies as overlaps are eliminated. It aims to create a combined business to be called Thyssenkrupp Tata Steel, a 50:50 venture between the two businesses whose 48,000 staff would be able to produce 21m tons of steel a year.

Although the new business will be run as an equal joint venture, the lastminute hitches are thought to relate to how a deal would be structured if the merged operation were sold. Thyssenkrupp is understood to be putting more assets into the joint business, and could argue for a larger slice after a sale.

Roy Rickhuss, general secretary of Community, said: “Steelworkers have fought hard to ensure the future of British steelmaking and we have secured significant investment across Tata’s UK business. This joint venture will only succeed if the necessary strategic investments are made to allow the business to thrive.”

Talks have been in the works since 2016 about the combination, which is seen as key to protecting steel jobs in all countries the companies currently operate in as the market becomes increasingly challenging.

Donald Trump’s decision to impose tariffs of 25pc on steel imports is only likely to increase the pressure on European producers, as they in effect close one of the world’s major markets. The US tariffs are likely to deliver a double whammy to European steel producers, with countries such as China, which are low-cost producers, rerouting output intended for America to Europe.