Indian industrial giant Tata Steel is to off load steel operations in the United Kingdom as part of efforts to sell loss-making European units.
The company is reportedly in discussions with Switzerland’s Klesch Group to sell off some of its UK-based speciality long products divisions which employ some 6500 people.
Tata is the second-largest steel producer in Europe and employs more than 30,500 people across its plants in Britain and the continent.
Its exit from some of its largest operations in Britain would be another blow to the country’s bruised industrial heartland, even as the UK government seeks to diversify the economy away from financial services.
Karl Koehler, chief executive of Tata Steel’s European operations, said the divestiture will help the group focus on the manufacture of so-called ‘strip steel’ which is used in everything from cars to washing machines.
“Tata Steel has a strategy of differentiating itself,” Koehler said.
“This is best done by sharpening the focus on the biggest part of our European business, in order to build a sustainable, robust, viable business with improved products and first class manufacturing expertise, therefore achieving a better competitive base,” he said.
Koehler declined to give a value for the potential sale or to disclose losses by the division. But he said the operations being put up for sale were “close” to breaking even.
Tata’s long products division makes wire rods, plates and semi-finished steel for markets including construction, shipbuilding, rail and engineering.
Tata, one of the world’s largest steel companies, has an annual crude steel capacity of 29 million tonnes a year.
In total, Koehler said the European long products division, which was restructured in 2011 and again last year, produces around 3.2 million tonnes of steel a year.
If a final deal is struck, Klesch will acquire Tata’s UK-based assets including Scunthorpe Steelworks, mills in Teesside, Dalzell and Clydenbridge in Scotland, as well as operations in France and Germany.
Tata Steel moved into Europe less than a decade ago, with its $13 billion acquisition of Britain’s Corus in 2007.
However, the company has been forced to consistently slash costs and jobs.
Producing steel profitably in Britain has become increasingly difficult given shrinking demand, plus higher energy, labour and logistics costs compared even with mainland Europe – itself struggling to compete with Asia and the United States.
Unions criticised Tata’s planned sale, a move they said threatened Tata’s future in Europe.
“The fact that Tata Steel wants to abandon half of its European operations and pull out of an entire strategic market does not bode well for the future and ends Tata Steel’s vision to be a global steel player,” the National Trade Union Steel Co-ordinating Committee said in a statement.
The committee said Tata Steel Chairman Cyrus Mistry had agreed to meet workers.
Tata undertook a major restructuring of its long products unit in 2011, with the loss at the time of about 1,500 jobs in Britain. Last year, it announced plans to cut another 500 jobs at the division.