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Tata’s UK Steel Plant ‘Almost Back in Profit’

Ever since Tata Steel announced their intention to sell off their entire UK operations, one figure has recurred in almost every discussion - £1 million per day. That’s the sum Tata’s UK steel business was losing. Whilst deals have been struck and meetings held around the globe, Tata have worked on reducing that daily deficit, and is would now appear that the plant is close to the point where it posts a minor profit, the Sunday Telegraph understands.

Senior sources saw that the Port Talbot based business was heading in the right direction even before Tata put it up for sale in March, with the Indian company simply losing interest in owning the business.

The news comes as the search for a buyer for the remaining assets continues. Greybull Capital have already purchased Tata’s Scunthorpe long products division for the nominal fee of just £1, but the larger Welsh operation remains on the market. It’s understood a major stumbling block for potential buyers was the significant losses that the operations were incurring on a daily basis.

Indeed, that huge burden was a major part of the reason Tata placed its UK steel operations up for sale, and therefore placing 11,000 British jobs on the line, as well as up to twice as many jobs along the supply chain. Before placing the business for sale, Tata rejected an ambitious turnaround plan known as the “Bridge” which would have involved an immediate cash injection of £100 million. However, Tata were unwilling to invest further into the business, having already injected around £1.5 billion since their initial purchase of the business in 2007 for £6.7 billion.

The falling losses at the business have been put down to a number of factors, including more efficient working practices, the rising cost of steel and a weakening of the pound which has made buying UK products from abroad cheaper. The company were also able to announce that in the year ending to March, the Port Talbot plant produced a record 3.2 tonnes of steel coil, beating their previous best by 165,000 tonnes.

Chris Asgill, a senior consultant at CRU warned that the upswing in profits might only be temporary, however, saying “The steel industry has seen an upswing in prices in recent months but we would question how sustainable it is, and would expect a correction before the end of the year,” he said.

One of the parties interested in purchasing the business is a member of the Port Talbot operations management group, Stuart Wilkie. Alongside an unnamed group they’re plotting a purchase of the plant. Steve Phillips, another member of the management buyout group said: “We believe the headline loss figure of £1m a day is overblown, the workforce is busting all production records and this underlines that steel making in Port Talbot and the UK is not the basket case that many people seem to think it is.”

They do, however, suggest that no buyout can go ahead without some support from the government. Plans were recently announced by the Conservative government to support a buyout with a 25% stake in the new business.

Steel is important to us at Custom Fittings for making products such as hydraulic hose fittings and we wish the plant at Port Talbot all the very best.

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