The closures are to have a significant impact on the automotive production environment and supply chains across the region. Is the transition to green steel upsetting traditional ecosystems?
Tata Steel has announced its decision to shut down its two blast furnaces in Port Talbot, South Wales, causing upset across the automotive industry. The planned closures are anticipated to significantly impact the automotive production sector. The closure will decrease steel output, affecting a crucial component in vehicle manufacturing as proposals by trade unions were rejected as being “unfeasible” due to the financial losses associated with the furnaces.
A trade union, joint statement expressed: “In one area the company did accept the Multi-Union recommendation, which is to keep the Hot Strip Mill open to roll slab over a transition period, supporting hundreds of jobs there, but Tata have rejected our broader proposals to safeguard production capacity and protect jobs.”
The consequences are likely to extend beyond immediate automotive production and likely to cause supply chain disruptions and potentially higher costs for automobile manufacturers, necessitating the procurement of steel from alternative sources.
Despite government investments the closures call into question the nature of ESGs in the face of fiscal viability
Only in September of last year, the UK Government had agreed on a joint investment package with Tata Steel to support this transition to greener steelmaking, highlighting the significance of the move towards more sustainable production methods.
The investment had been lauded as securing the future of steel in the region, but fiscal considerations call into question the idea of ESGs trumping traditional bottom-lines in automotive production.
While the shift to greener steel technologies like electric arc furnaces offer prospects for more sustainable supply chains in the future, it is likely to have considerable short-term effects on both the automotive production industry and the broader economic landscape.
UK steel to be dependent on tier suppliers
The setback is a real one, meaning that the UK will be unable to produce steel from end-to-end for the first time in its industrial history, tying the region’s production to tier-suppliers and necessitating a fundamental reshuffle of production processes and regional steel supply chains across the board. The Port Talbot shutdown will also lead to significant job losses, impacting the local economy and communities dependent on the steel facility.
Regional automotive production and supply chains are about to undergo major recalibration due to the decision, as the transition towards green steel leaves the steel and auto production industries exposed to the lack of viable transition systems from one technology to another.
Tata Steel’s Chief Executive Officer and Managing Director, T V Narendran, commented: “The course we are putting forward is difficult, but we believe it is the right one. Having invested almost £5 billion¹ in the UK business since 2007, we must transform at pace to build a sustainable business in the UK for the long-term.
Our ambitious plan includes the largest capital expenditure in UK steel production in more than a decade, guaranteeing long-term, high-quality steel production in the UK and transforming the Port Talbot facility into one of Europe’s premier centres for green steelmaking.
“We recognise this proposed restructuring would have a major impact on the individuals and communities concerned, whom we will support with dignity and respect. In consultation with our union partners, Tata Steel will offer a comprehensive support package to mitigate the impact of any anticipated job losses, including helping employees to retrain and find new jobs.
We will continue our work with the UK and Welsh governments, trade unions and the community to help those who may be affected through the proposed transition.”