Why Tata Steel wants a helping hand in the UK

The Indian steelmaker's aim to turn around its UK operations faces challenges from the external environment

- ISHITA AYAN DUTT

Port Talbot, Tata Steel's primary steelmaking site in South Wales, is busy. The blast furnace — the last of its legacy steelmaking assets — went cold on September 30, 2024. A year on, the site is humming with activity as Tata Steel UK prepares for its next chapter: A shift to low-carbon steel produced through an electric arc furnace (EAF).

The £1.25 billion transition — part-funded by about £500 million from the UK government — is slated for completion towards the end of 2027. Until primary steelmaking resumes, Tata Steel is servicing customers with imported slabs sourced from multiple geographies - a complex operational landscape.

What was once a 2.5-3 mt plant running on a flow of iron ore, coal, fluxes, oxygen and power has given way to a system in which the substrate (slabs) arrive from India, the Netherlands, Europe and South East Asia - each destined for a specific downstream line. The result: an intricate supply chain that demands rigorous tagging, tracking and routing.

Layered onto this complexity is the drag from softer steel prices, led by cheap imports, compressing conversion margins — and messing up the maths.

The management had set a target that the transition in the UK would be cost-neutral, giving way to an operationally stable and profitable business model once the 3.2 mt EAF was pressed into action. But Tata Steel UK's Ebitda (earnings before interest, taxes, depreciation, and amortisation) breakeven — expected in Q2FY26 — now largely rests on policy support from the UK government.

Roughly a year ago, Tata Steel set a Q2FY26 breakeven target for its UK operations. But the Ebitda losses widened quarter-on-quarter (Q-o-Q) to ₹765 crore from ₹471 crore in the previous quarter. Year-on-Year (Yo-Y), however, the losses halved from ₹1,587 crore in Q1FY25.

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