India's Tata Steel puts British business up for sale
Date
3/30/2016 10:15:14 AM
(MENAFN- The Peninsula) Workers leave theTataSteel plant in Motherwell Scotland Britain in this October 20 2015 file photo. REUTERS/Russell Cheyne/Files
By Promit Mukherjee
MUMBAI: India's Tata SteelBritain's largest steelmaker put its entire UK business up forsale to stem heavy losses a move that would draw a line underits almost decade-long foray into Britain's declining steelindustry.
After a marathon board meeting in Mumbai the steel giantsaid the financial performance of its UK arm had deterioratedsharply in recent months following years of weak conditionswhich have already forced it to shed hundreds of jobs.
Blaming high manufacturing costs domestic market weaknessand increased imports into Europe from countries like ChinaTata saw little change in the competitive position of its UKoperations which employ about 15000 people and include PortTalbot Britain's largest steel plant.
As a result Tata said in a statement its European arm would"explore all options for portfolio restructuring including thepotential divestment of Tata Steel UK in whole or in parts".
"Given the severity of the funding requirement in theforeseeable future the Tata Steel Europe Board will be advisedto evaluate and implement the most feasible option in atime-bound manner" it added.
Tata Steel bought Anglo-Dutch steelmaker Corus in 2007 andhas since struggled to turn the giant around.
The company said it remained in talks with the UKgovernment which has expressed concern about job losses in theindustry. Port Talbot though far from its 1960s peak stillemploys about 4000 people and Tata is one of the mostsignificant private companies in Wales.
Unions welcomed the decision not to shutter the plants butcalled on Tata to be a "responsible seller" and on thegovernment to play its role.
"We don't want just want more warm words we want a detailedplan of action to find buyers and build confidence in potentialinvestors in UK steel" Roy Rickhuss general secretary ofsteelworkers' trade union Community said.
The opposition Labour party called on the government to savean industry it described as "the cornerstone of ourmanufacturing sector". Labour leader Jeremy Corbyn againsuggested a part nationalisation of the steel industry ifnecessary.
The government has said it is ready to work with Tata.
TheTataSteel plant is seen in Scunthorpe northern England in this October 15 2014 file photo. REUTERS/Phil Noble/Files
Most steel companies including top producer ArcelorMittal have been hit by plunging prices due to overcapacityin China the world's biggest market for the alloy makingTata's task of finding a buyer all the more difficult.
"Tata Steel might not be able to find an immediate buyer forthe UK business but after six months that could be possible asEurope is expected to take some action on the cheap imports thatis flooding the region" said Ashish Kejriwal an analyst withbrokerage Elara Capital in Mumbai.
Tata Steel is the second-largest steel producer in Europewith a diversified presence across the continent. It has a crudesteel production capacity of over 18 million tonnes per annum in
Europe but only 14 mtpa is operational.
Two of its three main units Port Talbot and Scunthorpe arein Britain with the remaining operations in the Netherlands.
Its share price has halved in the past five years a periodin which it recorded asset impairment of more than $2.88 billionrelated to the UK business.
The stock opened about 2 percent higher in Mumbai onWednesday as investors welcomed the decision to shed a burdenon its Indian operation which also has been badly battered bycheap imports from neighboring countries especially China.
For the year ending March 2015 the company took awrite-down of a little over a billion dollars in itsconsolidated numbers. However the tide seems to be turning forthe India operations and many analysts expect it to post animproved operating profit from the next fiscal year.
Tata also said in its statement that it was still in talkswith investment firm Greybull Capital over the sale of itsBritish long products unit which makes steel for use inconstruction. Talks with Greybull were announced last year.