<article><p class="lead">India's Tata Steel has reached a £500mn ($620mn) deal with the UK government that will secure operations and jobs at its Port Talbot site in south Wales.</p><p>Under the agreement, Tata Steel will invest in an electric arc furnace (EAF) with a capital cost of £1.25bn, helped by the £500mn grant from the government. The move from Tata's ageing blast furnaces to an EAF will reduce the UK's carbon emissions by about 1.5pc and leverage domestic scrap availability, the company said. The total EAF capacity will be 3mn t/yr.</p><p>Tata will soon commence consultation on the proposal and transition period, including the potential deep restructuring for the carbon-intensive, unsustainable iron and steelmaking facilities. The company's blast furnaces and coke ovens are reaching the end of life, which has led to increased production instability of late. The plant is also relatively logistically inefficient, compared with its European sister plant in IJmuiden, the Netherlands.</p><p>The project will also involve restructuring of the firm's balance sheet with potential elimination of the current cash losses in the UK operations and non-cash impairment of legacy investments, the firm said. Tata Steel UK had net assets of £397mn at the end of March, down by £1.8bn from the previous year, mainly because of difficult trading conditions in the second half of its financial year.</p><p>The new investment project could be operational within 36 months of the receipt of relevant regulatory and planning approvals. </p><p>"During the transition period and project phase, Tata Steel UK would work intensively to ensure uninterrupted and reliable supply of products to fulfil customer and market commitments, including through imports of additional steel substrate from stable supply chains to feed its downstream units," Tata said. The company has been importing Indian hot-rolled coil in recent months, partly because of reduced production at the Port Talbot site, to feed its downstream business.</p><p>The move to EAFs could lead to the loss of about 3,000 jobs. Tata executives have quietly admitted for a number of years that the UK workforce needed to be right-sized.</p><p>Trade unions were disappointed by the scale of job cuts. "An electric arc furnace-only model for Port Talbot is simply the wrong approach for making our steel greener," TUC general secretary Paul Nowak said. </p><p>Tata was considering shutting down or selling its UK steel operations without government support as the business was operating at a loss and could not fund the green transition by itself. Critics have also questioned the move away from virgin iron production, when European governments are providing billions to Tata's competitors to decarbonise.</p><p class="bylines">By Sumita Layek &amp; Colin Richardson</p></article>
