Tata Steel said on Friday it planned to close the blast furnaces at Britain’s largest steelworks, in Port Talbot, Wales, and replace them with an electric furnace, a move that would reduce carbon emissions but could cost 2,800 jobs.
The company, part of the India-based Tata conglomerate, says the steel mill, much of which dates back to the 1950s, has frequently lost money.
“The path we are considering is difficult, but we believe it is the right one,” the company’s CEO, TV Narendran, said in a statement. “We must rapidly transform to build a sustainable business in the UK for the long term.” He said Tata had invested almost 5 billion pounds (about $6 billion) in the British business since 2007, when Tata bought the factory.
Last year, the British government offered £500 million in support for Tata’s plan, which has an estimated price tag of up to £1.25 billion.
Although the announcement did not come as a surprise, unions representing workers at the plant said they were angry that their proposals to save jobs had been rejected. The plant employs about 4,000 people and it was unclear how many of the job cuts would occur in Port Talbot; Tata employs around 8,000 people in Britain.
“It is an absolute disgrace that Tata Steel and the UK government seem determined to follow the cheapest plan rather than the best for our industry, our steelworkers and our country,” two unions, Community and GMB, said in a statement.
Tata wants to replace much of the current operation, which uses coal to extract iron from ore, with an electric furnace that makes steel by melting scrap metal in a flare of sparks. Electrical steel manufacturing, which is more common in the United States than in Europe, tends to employ fewer workers.
The government says the change would ensure steel production continues at the site and would reduce Britain’s total greenhouse gas emissions by 1.5 per cent.
Unions expressed skepticism that an electric furnace would be capable of producing metal of sufficient quality for some demanding applications, including automobile body panels and food and beverage cans.
But what is largely at issue is the timing of the move. In November, the unions, with the help of the consulting firm Syndex, made a counterproposal to Tata that involved keeping one of the two blast furnaces open until 2032. They also proposed that Tata build a smaller-than-planned electric furnace and also a device called Direct Reduction Plant, which produces raw iron through a cleaner process than a blast furnace. That iron could have been used to make higher quality metal.
Unions said this plan would have prevented forced layoffs.
Tata, however, has decided to move more quickly, much to the disappointment of employees.
The company said it would close one blast furnace by the middle of this year and much of the rest of the plant before the end of the year. Tata also said it would embark on a “broader restructuring of other locations.”
Tata said it would supply its British network with semi-finished steel from plants in India and the Netherlands until the new furnace was installed.
“We all understand that we have to get to a green industry, but this can’t be done in a matter of months,” said Barrie Evans, a steel mill employee and community union leader. “This is right on the edge of the cliff.”