Tata Steel has rejected the turnaround plan of Port Talbot prepared by workers' union and independent consultants as it requires a long-term capital commitment.
It has decided to explore all options, including the potential divestment of Tata Steel UK, in whole or in parts.
Given the severity of the funding requirement, the Tata Steel Europe Board will be advised to evaluate and implement the most feasible option in a time-bound manner, said the company in a statement.
Earlier, Tata Steel workers' union members alongwith their government officials made representations with a veiled threat of company damaging its reputation in case of adverse decision.
Restructuring plan revival
On review of the proposed restructuring plan, the board unanimously decided that the plan is unaffordable and requires material funding support in the next two years in addition to significant capital commitment over long term, besides the assumptions behind the revival plan are inherently very risky and delivery of results is highly uncertain.
Therefore, the board felt it would not be able to support the investment necessary to proceed with the proposed Strip Products UK transformation plan, it said.
Tata Steel said discussions will continue with Greybull to sell the UK Long Products business.
The board also reviewed the recent performance of the European business and expressed deep concern over deteriorating financials of the UK subsidiary in the last 12 months.
While the global steel demand, especially in developed markets such as Europe has remained muted since the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in imports , high manufacturing costs, weakness in domestic market demand and volatile currency, it said.
These factors are likely to continue and have a significant impact in the long-term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers in recent years.
Even under these adverse market conditions, the Tata Steel Group has extended substantial financial support to the UK business and suffered asset impairment of over £2 billion in the last 5 years.
The company said it will.continue to engage with the UK Government to seek support for the best possible outcome for the UK business, within the restrictions of State Aid Rules and other statutory limits, said the statement.