Tata Steel Proposes Turnaround Strategy for European Long Products Business
05/23/2011 - Tata Steel plans to invest £400 million over a five-year period to support its restructuring strategy for the Long Products business, which includes a proposal to close or mothball parts of the Scunthorpe plant and puts at risk 1200 jobs at Scunthorpe and 300 jobs at its Teesside sites.
Tata Steel has proposed a restructuring of its Long Products business to target high-value markets and introduce greater flexibility into its costs and operations. The company plans to invest £400 million over a five-year period to support this strategy, which includes a proposal to close or mothball parts of the Scunthorpe plant and puts at risk 1200 jobs at Scunthorpe and 300 jobs at its Teesside sites.
Significant cost savings were achieved in Long Products during the global economic downturn, according to Tata Steel, after a range of strategic actions were taken, including a radical restructuring of the Specialty Steels business, which is now in profit. The Long Products business as a whole, however, has continued to make losses over the last two years.
The decline in some major markets, particularly the construction sector, has been a key factor. Demand for structural steel in the U.K. is only two-thirds of the 2007 level and is not expected to fully recover within the next five years, the company says.
Karl-Ulrich Köhler, Managing Director and CEO of Tata Steel’s European operations, said: “We are proposing to take these actions only after going through an inclusive consultative process that involved very careful scrutiny of the Long Products business performance. We have used the experience we gained in turning around our Specialty Steels business in developing this strategy for the rest of Long Products, and we are convinced it represents the best chance of making this business successful and sustainable in the long term.
“The continuing weakness in market conditions is one of the main reasons why we are setting out on this difficult course of action. Another is the regulatory outlook. EU carbon legislation threatens to impose huge additional costs on the steel industry. Besides, there remains a great deal of uncertainty about the level of further unilateral carbon cost rises that the U.K. Government is planning. These measures risk undermining our competitiveness, and we must make ourselves stronger in preparation for them.”
Michael Leahy, General Secretary of Community union and Chair of the Steel Committee, said: “The key now is for the company to engage the local trade unions in consultation on the way forward. We will be seeking an early meeting to explore all possible means of avoiding any compulsory redundancies.”
As part of the restructuring, the business is proposing (in Scunthorpe):
- To close the Bloom and Billet Mill and associated steel caster (Bloom 750)
- To mothball the Queen Bess blast furnace, which will be kept in readiness for a market upturn
- To review the operations of the Billet Caster.
Jon Bolton, Director of Tata Steel Long Products, said: “This investment will improve Long Products’ manufacturing capabilities, particularly in the area of plant reliability. By closing the Bloom and Billet Mill, we will be taking out of production some highly energy-intensive plant that is pretty well obsolete in today’s steelmaking world. By mothballing Queen Bess furnace, we will match our operations to the new market realities, but retain the flexibility to respond to a market upturn.”
The investment follows a number of recent announcements in the business, including upgrading the rail rolling mill at Hayange in France, as well as improvements to the plate and wire rod rolling facilities in Scotland and England.
The jobs at risk are in operational, functional, and management positions. A 90-day consultation process will begin soon with affected employees and union representatives.
