Tata Steel plans to cut 400 jobs at its steel-making plant in Port Talbot, South Wales as it attempts to restructure its strips product business. Conditions in Europe remain challenging for the steel industry despite an uptick in demand.
The changes were needed to build a competitive future for the division, Karl Koehler, head of Tata Steel’s European operations, said on Tuesday. “Steel demand and prices are likely to be under pressure for some years.” He also pointed to the high cost of manufacturing in the UK vis-à-vis the rest of Europe.
“Our business rates in the UK are much higher than other EU countries,” said Koehler, referring to the tax on business properties, which a number of UK business lobby groups have been seeking to reform.
“Our UK energy costs will remain uncompetitive until new mitigation measures come into effect,” he added. The British Government included a number of measures in the March Budget to provide the energy-intensive industry with relief of around £7 billion. These include capping the carbon floor price, a tax on energy usage. Most measures come into effect in 2016.
The job cuts reflect the challenges facing the European steel industry, despite the gradual economic recovery. While demand has been mostly recovering, it remains far from pre-2007 levels. And, costs, particularly of energy , have risen rapidly.
The World Steel Association forecasts European steel use will rise 3.1 per cent in 2014. Tata Steel has, over the past two years, invested around £250 million in its strip products business in Port Talbot and Llanwern in South Wales.
This division produces steel for sectors ranging from automotive and construction to consumer appliances. The company has introduced a number of new, high value-added products, and invested in its Llanwern plant to enable increased production of high-value automotive steels.
“But we need to improve our competitiveness and flexibility in a tough marketplace to help us further develop a sustainable steel industry in Wales,” said Hridayeshwar Jha, Director of Strip Products, UK. The proposed restructuring will include a review of all manufacturing, engineering, technical and support functions, and would follow a 45-day consultation period.
Roy Rickhuss, Chair of the UK trade unions’ steel committee, said he recognised that the company was dealing with a long-term downturn in Europe, but expressed concern about possible under-manning within the affected division.
“It is vital that this is not just an exercise to reduce costs by cutting jobs, but takes a considered and objective view as to the numbers required to run and maintain the plant to make steel safely and productively.”