Britain in talks with Tata Steel over $630 million aid package: Reports

The British government is reportedly in advanced talks with Tata Steel, the country's biggest steel producer, to provide a $630 million aid package to help secure the long-term future of a key part of its steel industry. The funding would be pumped into the Port Talbot steelworks in south Wales, which employs about 4,000 people and is one of the largest integrated steel plants in Europe.

Why does Tata Steel need government support?

Tata Steel has been struggling with high costs, low demand, and cheap imports for years. The company bought the Port Talbot plant and other UK assets from Corus in 2007 for $12 billion, but has since written off most of its value. In 2016, Tata Steel announced plans to sell its UK operations, but later decided to keep them after failing to find a suitable buyer.

The COVID-19 pandemic has worsened the situation for Tata Steel, as lockdowns and travel restrictions have reduced the demand for steel from key sectors such as automotive and construction. The company reported a net loss of $1.3 billion for the fiscal year ended March 2021, and said it was exploring various options to reduce its debt and improve its liquidity.

One of the options that Tata Steel is pursuing is to transition from the traditional blast furnace method of producing steel, which uses coal and iron ore, to the more environmentally-friendly electric arc furnace method, which uses scrap metal and electricity. The electric arc furnace method is cheaper, faster, and emits less carbon dioxide than the blast furnace method.

However, switching to electric arc furnaces requires significant investment and restructuring, as well as potential job losses. Tata Steel has said that without government support, it will need to consider closing its sites.

What are the terms of the proposed aid package?

According to Sky News, the British government is in advanced talks with Tata Steel to provide $629 million of public funding to help the company build electric arc furnaces at Port Talbot and other sites. The funding would be part of a broader package that would also include $881 million from Tata Steel's Indian parent company and a commitment from the company to retain most of its UK workforce.

The government funding would be provided as a loan or an equity stake, and would be contingent on Tata Steel meeting certain conditions such as maintaining production levels, investing in research and development, and reducing its carbon footprint. The deal would also require approval from the European Commission, as it could be seen as state aid that distorts competition.

The proposed aid package is expected to be finalized in the coming weeks, and could be announced at the COP26 climate summit in Glasgow in November. The deal would be a major boost for the UK's steel industry, which employs about 32,000 people and contributes about $3.6 billion to the economy. It would also be a sign of the government's commitment to supporting green industries and achieving net-zero emissions by 2050.

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(1) Britain in talks with Tata Steel over $630 million aid package: Reports. https://www.moneycontrol.com/news/business/britain-in-talks-with-tata-steel-over-630-million-aid-package-reports-11300611.html.

(2) Britain in talks with Tata Steel over $630 million aid package. https://gulfnews.com/business/retail/britain-in-talks-with-tata-steel-over-630-million-aid-package-1.97873093.

(3) UK Nears Deal on £500 Million Support for Tata Steel, Sky Says. https://www.bqprime.com/markets/uk-nears-deal-on-500-million-support-for-tata-steel-sky-says.

(4) Britain in talks with Tata Steel over $630 million aid package, Sky .... https://www.wikifx.com/en/learn/202309027974108509.html.