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Five threats to steelmaking at Port Talbot from Tata and ThyssenKrupp's merger-The 19th China (Guangzhou ) Int¡¯l Casting product Exhibition
9/27/2017 casting expo-Die-casting expo-foundry expo |
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Wales Online reported that the merger between Tata and ThyssenKrupp may only prove a temporary reprieve for Port Talbot steel works unless the steel market improves. News of the signing of a memorandum of understanding between Tata and the German steel giant was widely welcomed earlier this week.
The planned coming together has been under discussion for more than a year, and finally moved ahead after Tata offloaded its pension liabilities under the British Steel Pension Scheme.
But does the joint venture mean that Port Talbot''s future as a working steel works is now assured?
Tata''s guarantees to Port Talbot only last for another five years
As news of the signing of the memorandum of understanding came out, union leaders and politicians were quick to call on Tata to give assurances that it would stick to its commitments on jobs and investments at Port Talbot and its other UK operations.
Those commitments are:
1. not to seek compulsory redundancies for five years;
2. to keep two blast furnaces operating at Port Talbot for at least five years;
3. to invest GBP 100 million a year over 10 years in UK steel operations, dependent on the business achieving Ebitda (earnings before tax, interest, debt and amortisation) of GBP 200 million a year.
Crucially the first two commitments only extend until 2021-22. It means that beyond that date the joint venture is free to look at Port Talbot again.
In fact we know from what Tata and ThyssenKrupp said earlier this week that the two companies plan to review their production network in 2020.
What will happen in that review is uncertain, but market analysts from Royal Bank of Canada expect it to include reducing capacity in upstream steel production, especially in Port Talbot.
This week''s announcement from Tata and ThyssenKrupp talked about achieving cost savings of up to GBP 530 million by 2020.
This would be achieved by integrating the two companies sales and administration arms, optimising procurement and logistics, joint R&D and improving their downstream steel processing.
-The 19th China (Guangzhou ) Int¡¯l
Casting product Exhibition
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