The UK’s biggest steelworks should be able to forge a bright future following Britain’s departure from the EU but it still needs to improve its financial performance, its owner has said.
The industrial complex in Port Talbot, south Wales, which employs 4,000 people, was threatened with closure in 2016 after being put up for sale by Tata Steel following years of losses. This led to questions about the future of Britain’s steel industry, which had been left weakened by cheap imports from countries such as China, and high energy prices.
But the Indian group later changed its mind and handed Port Talbot a reprieve until 2022 after trade unions agreed to the closure of a large pension fund.
Hans Fischer, chief executive of Tata Steel Europe, said he was optimistic about the Welsh steelworks but cautioned that a turnround was not yet complete. He suggested Port Talbot had a viable long-term future making strip steel, which is used in the carmaking and construction industries, among other things.
“I believe that it is possible to have in the UK one integrated site for strip steel,” said Mr Fischer. “That is a must and that’s possible, and Port Talbot has the best possibilities to stay there. But we are not there yet.”
Tata Steel is edging towards a merger of its business in Europe with that of German rival Thyssenkrupp, in a deal aimed at creating a European champion.
While about 4,000 jobs are to go at the enlarged entity, British unions fear the proposed transaction, which is being investigated by Brussels on competition grounds, could leave Tata Steel’s British operations vulnerable to further cutbacks.
Tata Steel UK recorded an adjusted operating loss of £48m in the year to March 31, after a profit of £106m in the previous 12 months. The deterioration in performance was partly due to higher raw material prices and operational issues with a blast furnace.
Mr Fischer expressed confidence the British operations would hit a target to generate £200m of annual earnings before interest, tax, depreciation and amortisation, but declined to say when.
Meanwhile, Mr Fischer backed Prime Minister Theresa May’s Brexit deal, which has come under strong attack from Eurosceptic Conservative MPs. “What we see is a deal that offers the potential for frictionless trade and therefore that is a good deal,” said Mr Fischer.
Some large manufacturers, including carmaker Jaguar Land Rover and aerospace group Airbus, have warned of negative consequences from a disorderly Brexit, where the UK crashes out of the EU without a deal.
But Mr Fischer said such a scenario should not “heavily impact” Tata Steel’s UK operations, which generate 60 per cent of sales for the home market. However, he accepted that the British operations could run into issues if its UK customers were hurt by Brexit.
“If the customers decide — automotive or in the packaging industry or whatever — they . . . are not able to produce [in Britain] any more, then [we] will have an issue,” said Mr Fischer.
Another concern for the steel industry is the fallout from US tariffs on imports of the grey metal imposed by president Donald Trump. Despite initial fears in some quarters that the move could hurt the recovery taking hold among British steelmakers, Mr Fischer said Tata Steel Europe was still supplying its products into the US market in a manner similar to before Mr Trump’s tariffs were introduced.
“Our customers need that product and are also willing to pay for that,” he said.