This Q&A is intended to provide a brief overview of Tata Steel’s recent announcement regarding the Port Talbot steelworks.
Q. What is happening at the Tata Port Talbot Steelworks?
Tata, the owners of the steelworks at Port Talbot, have been making losses of hundreds of millions of pounds every year (£1.5 million a day, to be precise!). They informed the UK Government last year that they intended to close the steelworks and withdraw from the UK.
If Tata withdraws from the UK, 8000 jobs would be at risk as well as thousands more in the supply chain. It would have also meant the end of steel making in Wales.
Tata were unequivocal that the government needed to back its latest plan or it would pull out completely.
Q. What did the UK Government do to prevent the closure of the steelworks?
The UK Government and Tata agreed a plan which would see the two blast furnaces at Port Talbot replaced with an electric arc furnace.
The arc furnace will cost £1.2billion. The UK Government will pay £500 million and Tata will pay the rest. The arc furnace proposal will secure 5000 of the 8000 jobs at risk. Therefore, the Government are paying £500 million to save 5000 jobs and many thousands more in the supply chain, ensuring that steel continues to be made in Wales
Q. Does this deal mean that the UK will be more reliant on steel imports?
No. A blast furnace makes steel from iron ore and coke, and both of these commodities are currently imported from other countries meaning that we are already dependent on imports to support the UK steel industry.
However, a transition to an Electric Arc Furnace will enable better use of domestic resources to enable steel production, such as scrap metal. Currently, the UK exports most of its scrap, and so there is the potential to use this domestic supply for domestic production.
Q. How will it impact the defence industry?
The Port Talbot Steelworks does not make steel for the defence industry. However, one company which does produce specialist steel for the Defence industry is Sheffield Forge Masters, which use an Arc Furnace to produce the material.
Steelmakers have invested heavily in new Arc Furnace steelmaking technology in recent years, and this technology is now able to produce some of the highest-quality steel grades for customers.
Q. Could one blast furnace be left operational whilst the new arc furnace was being built to reduce job losses?
Tata have considered this but rejected it outright. They have done so on grounds of costs and also because of the difficulty of building an electric arc furnace on the same site as an operating steel plant.
Q. Were other alternatives to this deal considered?
In the future it may be possible to produce steel using hydrogen instead of coke to reduce iron ore.
There is one plant in the world - situated in Sweden - which is experimenting with this technology. At present, it is not commercially viable, and the steel being produced as expected to cost around 25% more.
Even if Tata did adopt the approach of keeping one blast furnace open or building a hydrogen plant, it would still lead to the same number of job losses but over a different time period.
However, the Port Talbot transformation project does not prevent further technologies being deployed in time.
Q. Are Electric Arc Furnace tried-and-tested technology?
Yes. When commissioned, the Electric Arc Furnace will provide modern, efficient and less carbon-intensive methods resulting in a cleaner future, securing jobs in steel and manufacturing across the UK. Steel producers in the US and Europe are also transitioning to Electric Arc Furnaces.
Q. Does this mean that the UK Government is supporting job losses?
No. The deal struck by the UK Government with Tata will safeguard around 5,000 jobs in the UK steel industry, as well as around 12,000 jobs in the wider supply chains.
However, we all recognise this is a devastating blow for the community of Port Talbot and we are committed to doing everything we possibly can to save jobs and support anyone who loses their job. This is why the UK Government has set up the Port Talbot Transition Board, backed by £80 million from the UK Government and £20 million from Tata.
Q. What is the Port Talbot Transition Board, and how will it help those affected by Tata’s announcement?
The Port Talbot Transition Board will work together to develop a holistic response to the transition at the Tata steelworks.
The Board is chaired by the Secretary of State for Wales, David Davies MP, and brings together representatives from Welsh Government, Tata Steel, local Members of the Senedd, Local Government and a broad range of experts from different backgrounds.
Q. How else is the Government supporting the future of Port Talbot/the South Wales economy?
The UK Government is providing substantial support for the economy of Port Talbot/South Wales, with further projects being developed. This includes the development of the Celtic Freeport in Port Talbot and Milford Haven, backed by up to £26 million in UK Government funding, which will focus on low carbon technologies. It aims to create some 16,000 jobs by mid-2030. The Celtic Sea is also a prime location for floating offshore wind, and any future development could see thousands of skilled jobs created.
Meanwhile, the Swansea Bay City Deal – which covers Port Talbot – is process of delivering a number of exciting developments across the region.
Q. Has the Welsh Government offered any support?
To date the Labour Welsh Government hasn’t offered a single penny towards the transition board. The Secretary of State for Wales has also, on more than one occasion, invited the First Minister to a phone call to discuss the job losses – but the offer has, so far, not been accepted.