The Government and the country’s biggest steel union have called on Tata Steel and Thyssenkrupp to commit to safeguarding British jobs in the wake of an announcement that the two companies intend to merge their European steel operations.
Tata, the Indian conglomerate that operates the Port Talbot steelworks, and Germany’s Thyssenkrupp on Wednesday said that they had struck a preliminary deal to create the continent’s second largest steel producer after ArcelorMittal, in a bid to tackle crippling oversupply in the market.
Business secretary Greg Clark welcomed the news cautiously, describing it as “an important next step [for] Port Talbot as a world-class steel manufacturer, with a focus on quality, technology and innovation”.
But he also pushed the two companies to commit to safeguarding jobs and extending blast furnace operations over the long term at the Welsh site.
The future of Tata’s business in the UK, and particularly at its steelworks in Port Talbot, has been uncertain since the Indian company last year said that it intended to sell its British assets.
Tata employs around 4,000 people in Port Talbot and on Wednesday the two companies said that, over the long-run, the tie-up could result in around 4,000 job losses across the combined groups. Up to 2,000 of those cuts are expected to be in administration and up to 2,000 in production.
Roy Rickhuss, the general secretary of Community, the largest trade union for the UK steel industry, also welcomed the proposed merger and said that it “could deliver significant benefits for the UK”. He warned, however, that the “devil will be in the detail”.
“As a priority, we will be pressing Tata to demonstrate their long term commitment to steelmaking in the UK by confirming they will invest in the reline of Port Talbot’s blast furnace no.5,” he said.
Any deal is still subject to approval by Thyssenkrupp’s supervisory board and Tata Steel’s board of directors as well as that of the European Commission. If it does go ahead, the combined venture will be owned equally by both companies and be based in or near Amsterdam.
“Under the planned joint venture, we are giving the European steel activities of Thyssenkrupp and Tata a lasting future,” Thyssenkrupp chief executive Heinrich Hiesinger said in a statement.
Mr Hiesinger said that by combining their operations, the two companies are “tackling the structural challenges of the European steel industry”.
Natarajan Chandrasekaran, chairman of Tata Steel, said that his own company and Thyssenkrupp “share similar culture and values”.
“The strategic logic of the proposed joint venture in Europe is based on very strong fundamentals and I am confident that thyssenkrupp Tata Steel will have a great future.”
The two firms said that in the years after the deal is completed, they will focus on "leveraging synergies". Over the longer term they expect those annual synergies to amount to between €400m and €600m (£355m and £533m) across areas like sales, administration, logistics and research and development.
The two firms have reportedly been engaged in tie-up talks for over a year, in a bid to cut costs as overcapacity bites. Steel prices have recovered somewhat in recent months but the industry still faces a massive glut as a result of big Chinese exports.
“We have always targeted the best solution for Thyssenkrupp,” said Mr Hiesinger.
Separately on Wednesday Germany’s labour minister said that the deal should not happen at any cost and that if it did go ahead, the headquarters would have to be in Germany.
Andrea Nahles also said employee representatives needed to be involved in consultations on upcoming negotiations and existing commitments to workers needed to be kept.
Additional reporting by Reuters
