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Tata Steel and UK government jointly plan to invest in EAF facility at Port Talbot

* Tata Steel and the UK government today announced their plan to invest in a 3mt EAF facility at Port Talbot. The project is expected to take about 36 months to complete, contingent upon obtaining all necessary regulatory approvals.

* The proposed agreement will require a total investment of GBP1.25b (including a grant of GBP500m by the UK government) and the facility will help curb emissions of up to 50mt over the next decade. The company would undertake consultations with unions and stakeholders on the proposed transition in the coming weeks.

* Tata Steel UK has been facing multiple challenges as its assets approach the end of their operational lifespan. The proposed agreement reflects Tata Steel’s commitment to securing the ongoing continuity of steel manufacturing at the Port Talbot facility.

* The company hosted analyst/institutional investors call to discuss the proposal in greater details. Following are the key takeaways

Highlights from the analyst/institutional investors conference call

Proposal with UK government:

* The proposed agreement will require a total investment of GBP1.25b (including a grant of GBP500m by the UK government). This is the largest grant by the UK government till date.

* Prior to finalizing the proposal, a comprehensive consultation process will be initiated with the Union and other relevant stakeholders. The consultation process is scheduled to commence next week and could take 45-60 days.

* After obtaining all the regulatory approvals, it would take 36 months for the facility to be commissioned.

* The existing UK facility had operational issues as the assets were nearing the end of their lifespan, which led to higher operating costs.

* The UK government will not provide any operating grant over and above GBP500m.

 Port Talbot facility:

* Establishing a 3mt EAF facility would be the optimal size for a steel facility in Port Talbot.

* The GBP1.25b in capex would be allocated for the establishment of the EAF facility, as well as the enhancement of two casters, HSM, and the consolidation of the CRM facility

Cost synergies:

* Upon commissioning the 3mt EAF facility, it is expected to yield cost reductions of around USD150-170/t as compared to the current BF facility.

* The cost curve for Tata Steel UK is currently in the fourth quartile and it is expected to improve.

* The new facility will utilize scrap, which is readily available within the UK, making it more cost-efficient. The UK currently produces an average of 10mt p.a. of scrap, with a significant portion being exported. With the operation of this facility, a substantial amount of scrap can be used domestically.

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