Tata Steel has announced its plans to shut operations ins Orb Electrical Steels in Newport, South Wales, and at the Wolverhampton Engineering Steels Service Centre in the UK, leading to a potential loss of more than 400 jobs.
With the European steel industry in shambles, the company foresees no prospects of the business returning to profitability in the coming years in these factories it plans to shut down.
Weaker economies in Europe and increased trade tensions are biting into sales and shrinking the growth of the steel industry. Additionally, European car sales have fallen for eight months due to declines in the U.K. and Germany, leading to a drop in steel demand. Further, European steel demand has been suppressed by low-cost imports coming from places like Turkey and Russia.
The declining European steel industry is what has led Tata Steel to close operations in these factories in the UK.
"Continuing to fund substantial losses at Orb Electrical Steels is not sustainable at a time when the European steel industry is facing considerable challenges," shared Henrik Adam, CEO, Tata Steel's European operations.
Adam added that this move is necessary, as it enabled them to focus their resources, including investment, on their core business and markets, helping them build a long-term sustainable future in Europe.
The Orb Electrical Steels business in Newcastle had been loss-making for some years now. It had been struggling to compete in the fast-moving market to supply steels used in electricity transformers in which customer requirements have out-stripped the site's capability. As Tata Steel realized that converting the site to create steels for future electric vehicle production would cost an additional 50 million pounds in a highly competitive market, the decision to shut operations seemed wise.
While Tata Steel continues to sail through the challenges surrounding the industry currently and face higher-volume competitors both in Europe and globally, it has planned to protect the interests of the affected staff of these factories. The Tata Group has shared that every effort will be made by their steel business to mitigate the impact on affected employees. Alternative employment opportunities might be offered to the workforce for other possible Tata Steel sites.
The consultations of impacted employees and trade unions at both Orb and Wolverhampton are said to begin shortly. The process will also include assessing ways to minimise the need for compulsory redundancies.
As Tata Steel gets affected by the declining European Steel Industry, UK Economy Minister Ken Skates demands the UK government to step up and broaden its approach to supporting the industry.
"Today's news clearly demonstrates the fragility of the global steel market and the UK government must now step up and broaden its approach to supporting the industry, including its supply chain, across the whole of the UK," said Skates.
Senior leaders, from other firms like Outokumpu, Salzgitter, and ArcelorMittal have also raised concerns, earlier. Earlier, in May ArcelorMittal had also announced it would cut production to help balance the market. The world’s biggest steel maker had then said that it will scale back output in Germany, France and Spain this year until market conditions improve.
“Do you want a Europe without steelmaking or do you want a Europe that is the world leader in modern steelmaking?” questioned Geert van Poelvoorde, CEO of ArcelorMittal Europe Flat.
As Skates said, it is indeed time, the UK government step up and help the industry get back on track.
Image Credits: Tata Steel Europe