Tata Steel has announced plans to sell its European long products division seven years after first stepping into the European steel market, as it sharpens its focus on the more lucrative and larger strip products division.

The company is in talks with the Klesch Group, a Geneva-based industrial house focused on oil, chemicals and metals, and has signed a memorandum of understanding to carry out due diligence and negotiations for the potential sale of the division, which is largely centred in Scunthorpe, Northern England.

The sale was being considered because the group intends to focus on being a strip steel player, Karl Koehler, CEO of the group’s European operations, said in a conference call from Scunthorpe. A sharper focus was necessary to help create a “competitive” base, he added.

Large workforce The long products division represents a sizable part of Tata Steel’s European workforce — around 6,500 people across the continent work for the division and its distribution facilities, with the vast majority based in the UK (5,900) and Scunthorpe, in particular, where it has 4,000 employees. Tata Steel has long highlighted the pressures on its long products division, which caters to a number of industries, including the beleaguered European construction industry.

If successful, the asset sale could happen at the earliest by the end of the first quarter of next year, Koehler said.

He added that while there were no guarantees at this early stage of the consultation, the Klesch Group had “stated in good faith their intention to support the continuity of the business”.

While Tata Steel has in the past pointed to the high cost of doing business in the UK — particularly electricity charges and costs imposed on the manufacturing sector as part of the government’s environmental policy — Koehler said “substantial steps” had been taken to address some of the industry’s concerns.

While the long products division had previously been loss-making, Koehler said that it was on target to break even in the current financial year.

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