Thu, 31 Mar 2016 | BUSINESS SALE
According to Business Minister Anna Soubry, the government will be considering “all options” when it comes to finding a buyer for Tata’s Port Talbot steel plant.
Originally, some analysts and media sources believed this would mean, at least in the short term, nationalising the struggling steel-making operation. However, Prime Minister David Cameron and Secretary of State for Business, Innovation and Skills Sajid Javid were both quick to dismiss the idea of nationalisation.
However, with around 3,000 direct jobs at stake, as well as an estimated 25,000 more within Tata’s supply chain, it’s clear that something must be done sooner rather than later. Added to this is the fact that the Port Talbot operation is so energy intensive that it would require significant investment to turn its fortunes around. Tata insiders estimate this to be in the region of £2 billion, with no guarantees that the potential returns would be anywhere near as generous as this figure.
One often mooted buyer that may be interested in Port Talbot is Germany’s ThyssenKrupp, but with European steel in a slump, the company is itself currently under intense pressure. Even potential Russian or Chinese buyers would be put off by the higher costs and overcapacity in Europe, according to some analysts.
On the plus side in terms of finding a buyer, there have been reports that Tata now values its British steel operations at “almost zero”. Furthermore, a company source is reported to have said that Tata was even prepared to “give it away for nothing”.
Nevertheless, Tata has apparently written off around £2 billion from the value of its UK assets. This has rendered them effectively useless. What's more, Koushik Chatterjee, the finance director of Tata Steel, said that Port Talbot had become “quite a burden for the company”, with the board admitting “we can’t sustain this kind of exposure”.
For more on this story, see the blog Tata Steel puts UK business up for sale.
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