London: The smoking towers of the Port Talbot steelworks have dominated the South Wales skyline for more than a century. If they’re to continue to do so for decades to come, they’ll need to make more money.
The past decade has seen some of the most traumatic years for the plant. Hurt by the global financial crisis and then by a commodity-price collapse in 2015, site owner Tata Steel Ltd. struggled to make money in the UK. It has sold most of its British assets, bought as part of a $12 billion deal just a decade ago, but still runs Port Talbot after abandoning a sale process in 2016.
“The objective of any site should be that it can take care of itself. That’s your best guarantee for the future," said T. V. Narendran, managing director of Mumbai-based Tata Steel. “The effort put in in the last three years has brought the business to 60% of where it should be."
While the curtailment of cheap Chinese supply has helped the market recover in the past couple of years, Tata is merging its European steel operations with German rival Thyssenkrupp AG to better compete. Though the companies say this will create a stronger business on the continent -- second only to ArcelorMittal -- Tata’s UK operations have long underperformed its Dutch assets and Thyssenkrupp’s German plants.
For now, Tata remains committed to Port Talbot. It’s working on extending the life of one of the two blast furnaces and has pledged to run both of them until at least 2022. After that it will come down to performance.
“A lot depends on our ability to continue to improve the performance in the UK, and to continue to generate cash in the UK and run a competitive business there," Narendran said. “We are also waiting to see the outcome of Brexit and what the impact of that is on our operations, and then we will decide."
British steelmaking has been in decline for more than a century, eclipsed by the US by the start of World War I and later overtaken by Germany. In the 1970s and 1980s, inefficient and outdated plants saw production slump, falling behind France, Italy and Belgium. More recently, a lack of investment, higher energy costs and a tough regulatory environment have hurt UK steelmakers that once produced about 40% of global supply.
Tata also faces Brexit uncertainty. With just six months until the UK is set to leave the European Union and lawmakers from both sides yet to reach an agreement, the steel producer says it’s preparing for the worst.
Until “the terms of Brexit are clear, it’s difficult for us," Narendran said. “It will impact us because 30% to 40% is exported. We will be impacted because of what happens to the pound. We will be impacted by what happens to our customers. There are multiple moving parts."
Still, Tata said much preparation can be done in advance to ensure supply chains between the Netherlands and U.K. run as smoothly as possible, and that it has been given pointers from the British government to help that.
“There are too many ifs and buts now," said Narendran. “It’s a question of adjusting to a new way of life and adapting to that."
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.