The merger of Tata Steel and ThyssenKrupp - what impact will this have on the Welsh steel industry?

29.08.2018

Following years of uncertainty surrounding the impact of the deal on British plants, unions now say the merger between both steel giants will secure jobs and investment in the UK steel industry - a welcome announcement for the 4,000+ workers in Tata’s Port Talbot plant whose future hung in the balance as the deal was delayed.

The merger will see Tata’s UK plants expand into a pan-European venture, which includes the UK's biggest steelworks at Port Talbot. As a "50-50 joint venture”, Tata claimed it had made a specific commitment to avoid compulsory redundancies as a result of the tie-up while ThyssenKrupp faced mounting pressure from shareholders to secure better terms from Tata.

Of course, it’s not hard to see why: in March 2016, Tata Steel announced it was putting its entire UK operation up for sale as it suffered losses of over £1 million a day and a £15 billion pension deficit. Following the result of the EU referendum, the Indian-owned firm opted for a strategic U-turn on their initial plans and began discussing possible deals with ThyssenKrupp in a bid to benefit both organisations. 

Two years on and negotiation have finally reached a positive conclusion.

Under the terms of the merger, ThyssenKrupp Tata Steel will invest the first £200 million of operating profits into the business and have insisted that no compulsory redundancies will be made until at least 2026.  Further to this, plans to extend the life of Blast Furnace Number Five at Port Talbot have now been given the go-ahead, with roughly £75m set aside for the repair of the furnace. The move would extend its life by seven years and help to ease concerns regarding the future of the firm.

Now known as ThyssenKrupp Tata Steel, the newly merged firm will be based in the Netherlands; second only in the European steel industry to ArcelorMittal in size. With a 48,000-strong workforce spread across 34 sites, the firm will produce an estimated 21 million tons of steel a year with revenues of around €15bn.

Reflecting on the deal, Roy Rickhuss, general secretary of the Community union, says there will now be "significant" investment across Tata Steel's UK business.

"With a commitment to avoid compulsory redundancies until October 2026, and the first £200 million of any operating profit being invested back in the business, this joint venture has the potential to safeguards jobs and steel-making for a generation.

"However, this joint venture will only succeed if the necessary strategic investments are made to allow the business to thrive,” he added.

The merger marks a milestone for the Welsh steel industry. Despite Wales’ historic reputation as an industrial powerhouse, years of underinvestment by corporate owners have left the Welsh and wider UK steel industry lagging behind their European rivals in recent years. When Tata Steel put their entire UK operations up for sale in 2016, it was a clear symptom of a deteriorating industry environment.

However, news of the merger has recently been interpreted by industry experts as a positive step forward for our national steel industry: by concentrating EU steel production in the hands of a few large firms, the hope is that companies such as ThyssenKrupp Tata Steel will help the entire sector to navigate the choppy waters ahead. The question is, will increased market concentration aid to restore profitability into the Welsh steel sector and reinstate its former glory? Only time will tell.