Stained steel
Port Talbot jobs fear as Tata bins plans for merger
GERMANY’S Thyssenkrupp and India’s Tata have abandoned a blockbuster merger of their European steelmaking operations, raising fears for jobs at the Tata-owned Port Talbot plant in south Wales.
Thyssenkrupp said it had given up hope of getting the tie-up past European competition regulators after a number of concessions including offers to sell chunks of both companies’ operations failed to pass muster.
“Further commitments or improvements would adversely affect the intended synergies of the merger to such an extent that the economic logic of the joint venture would no longer be valid,” it said.
Announced almost two years ago, the merger would have created Europe’s largest steel maker and was intended to cut costs, giving the combined company a better chance of competing with cut-price global rivals.
Roy Rickhuss, general secretary of the steelworkers’ union Community, said the collapse “raises as many questions as answers” and urged Tata against taking any “knee-jerk reactions”.
He said: “Now is the time for calm heads and a clear focus on the future of Tata Steel Europe. It’s vital that the business is kept intact and the right steps are taken to safeguard jobs and continue investment to ensure a sustainable future.”
Asked whether the news meant Port Talbot would have to close, TV Narendran, Tata Steel’s chief executive, said: “The plant will obviously keep running, we need to make sure we run it well.
“We didn’t have a great year last year in the UK and we need to make sure this year we run it in a manner that is cash positive.” Higher energy costs were “not helping us”, he added, “but we plan to keep running in the UK as long as it is performing well”.
Port Talbot employs 4,000 people. Once part of British Steel, it was one of several European steelworks taken over by Tata in its 2006 merger with Corus.
The European Commission was last weekend reported to be considering vetoing the merger over concerns it could push up prices and reduce choice for the companies’ customers, which include car and food packaging manufacturers.
Thyssenkrupp said it was now abandoning plans to break itself up into two divisions but was looking at a potential stock market flotation of its profitable elevator manufacturing business, which analysts described as the “crown jewel in its portfolio”. It is also planning to cut around 6,000 jobs including 4,000 in Germany.
Its shares soared nearly 30pc on the news, suggesting shareholders were happy to see the merger called off.
Tata Steel said it “remains committed” to splitting off its European business and deleveraging its balance sheet.
Koushik Chatterjee, Tata Steel’s chief financial officer, said: “We will go back to the drawing board and look at all options, we will look at what are the most fundamental strategic levers that we can work on.
“The business has to perform and work hard to deliver results. In the meantime we will look at other strategic opportunities if they were to emerge.”
The abandoned merger is the latest twist in the fate of Britain’s steel industry, which has been buffeted by fierce competition from the Far East and a growing trade war between the US and its rivals.
Thai-owned SSI closed its giant Redcar steelworks in 2015 and Port Talbot had looked set to face a similar face the following year until Tata struck a £1bn rescue deal with its unions.