Funding support of several hundred million pounds in taxpayers’ money to help Tata decarbonise its huge Port Talbot steelworks is close to sign off. The UK Government is poised to announce a huge financial grant to the Indian owners of the primary steel making plant that directly employs around 4,000 to move to a green steel model.
A similar funding package of around £300m is also expected to support the decarbonisation of British Steel’s Scunthorpe primary steel plant. The Lincoln steelworks is owned by Chinese firm Jingye.
Last year chairman of Tata Group, Natarajan Chandrasekaran, said action to close its UK operations would be taken in 12 months if a financial support package from the Westminster was not forthcoming. He said he was looking for £1.5bn in government support. Based on that an offer of £300m would fall significantly short of Tata's ask.
The Port Talbot plant is the biggest industrial contributor to carbon emissions in Wales at around 5.8 million tonnes a year.
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To decarbonise, Tata could maintain it blast furnaces at Port Talbot, which uses coking coal and iron ore to make steel, and install carbon capture and storage technology - while using the carbon to provide power.
However, the more likely decarbonisation approach, and one with a proven industry record, would to be invest in arc furnaces to make steel from recycled steel - a process which is used by Celsa at its Cardiff plant. Electricity to power the arc furnaces could come from renewable sources.
However, while a condition of UK Government support will be around safeguarding jobs in the short to medium-term, arc furnace steel production would require significantly fewer jobs.
The cost of decarbonising Port Talbot has been put at £2bn. Tata has been asked to comment. The UK Government’s Department for Business, Energy and Industrial Strategy said it is working closely with the steel industry to secure what it describes as “a sustainable and competitive future.
The two blast furnaces at Port Talbot have had investment to extend their production lives. Blast furnace 4 in 2012 had its life extended by 20 years to 2032. Blast furnace 5 will expire in 2026, following investment in 2018.
From a planning perspective, Tata would need to move quickly if it is to start a phased or complete arc furnace transformation, with arc furnace capacity ready to take over from blast furnace 4 in 2026.
The other option, is that Tata from 2026 just operates one blast furnace (4). Both furnaces have capacity to provide 5 million tonnes of steel, but are currently operating at around 3.6 million equally split. . Blast furnace 4 has capacity to produce 2.6 million tonnes.
Tata has been in discussions with the UK Government over a funding support for the last two years, originally under the Treasury’s so called project birch initiative - set up to back firms deemed of being of national and strategic importance to the UK Government.
As well as its primary steelmaking plant in Port Talbot, Tata Steel UK employs 8,000 in total in the UK with its downstream businesses, which include those at Shotton and Trostre.
If Port Talbot does move to a recycled steel arc furnace operation the quality of steel produced should be of the required standard for its downstream businesses to make finished products, including cans for the food industry at Trostre.
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