Tata Steel is in talks with a Swedish rival over the potential sale of its Dutch business, a move likely to cast uncertainty over the future of Britain’s largest steelworks in Port Talbot.
SSAB confirmed on Friday that it was holding discussions about acquiring the Indian group’s Ijmuiden plant, one of the biggest in Europe, with a workforce of 9,000, as well as related processing facilities.
The development comes at a time of turbulence in Europe’s steel industry, which has taken a battering from the Covid-19 pandemic and is suffering from excess production capacity and high import levels.
SSAB said: “The discussions with Tata are ongoing but no decisions have been made. There can be no certainty that any transaction will materialise, nor as to the terms of any such potential transaction.”
Analysts said Europe’s steel sector was in dire need of consolidation to confront challenges that include the massive investments required for decarbonisation.
Tata Steel said: “We will undertake a due process and move to the next stages including consultation and due diligence.”
The Indian group added that it had begun a process to split the UK and Dutch sides of its European steel division to “pursue separate strategic paths”.
That will raise the alarm among its 8,000 UK workers, about half of whom are based at the Port Talbot complex in south Wales.
Despite restructurings, job cuts and the sale or closure of a number of mills over the past decade, the British operation has long failed to turn a profit and was unsuccessfully put up for sale in 2016.
Its owner requested hundreds of millions of pounds in public financial assistance earlier this year to get through the coronavirus crisis.
Tata, which has warned that the pandemic threatens its UK subsidiary’s ability to continue as a going concern, on Friday said it remained in talks with the UK government over possible help.
Roy Rickhuss, general secretary of the British steelworkers’ union Community, said: “Should we conclude the separation of Tata Steel UK would place our members’ livelihoods at risk, then we will vigorously oppose the break-up of the company.”
Tata, whose other British interests include carmaker Jaguar Land Rover and Tetley Tea, entered European steel with its £6.7bn acquisition of Anglo-Dutch producer Corus in 2006.
But the expensive deal was at the peak of the commodities boom and turned out to be disastrous, leading Tata to seek an exit.
A previous attempt to form a European steel joint venture with German rival Thyssenkrupp was scuppered by the European Commission on competition grounds last year.
SSAB runs plants in Sweden, Finland and the US, with annual production capacity of 8.8m tonnes and 14,500 employees, along with finishing facilities in China and Brazil. Its shares dropped 4 per cent following the announcement.
Tata Steel’s share price has rallied 20 per cent since late October on anticipation of a possible deal for its European assets.
Its troubled UK steel arm has proved a thorn in the side of the Indian management, draining cash and distracting from more promising ventures such as its flagship IT business and nascent foray into digital services.
Natarajan Chandrasekaran, chairman of parent company Tata Sons, said this year that it would not keep funding its European assets, and did not rule out an exit to focus on the fast-growing Indian steel market.