Tata’s steel plant in Port Talbot, south Wales, accounts for almost half its 8,000-strong workforce © AFP via Getty Images

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Union leaders have warned of potentially significant job losses if the owner of Britain’s biggest steelworks converts its furnaces to electric power this decade in order to secure hundreds of millions of pounds of emergency state aid.

Tata Steel has been in talks with officials for months over a package of support for its UK operations, centred on the Port Talbot plant in south Wales that accounts for almost half its 8,000-strong workforce.

It is one of about half a dozen companies in detailed negotiations with the Treasury through “Project Birch”, which is open only to businesses deemed strategically important and unable to access any other coronavirus loan schemes. The bailouts could see the state end up with equity stakes in certain circumstances. 

Ministers are imposing strict conditions on rescue deals, such as limits on executive pay and tough environmental targets in order to help the UK hit its 2050 “net zero” carbon target. 

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Tata, which is part of the Indian conglomerate, is looking at a range of options to reduce its emissions. 

Among them is the replacement of Port Talbot’s two blast furnaces, which convert iron ore and coal to steel, with electric arc furnaces that melt scrap. This would start in 2025 and involve public investment and was first reported by the Sunday Times.

The government would force the company to promise to protect jobs under any deal, but trade unions fear many jobs would be lost in the longer term because electric arc furnaces are less labour-intensive.

The steelworkers’ union Community said closure of the blast furnaces would be “devastating”. “[This] would leave the UK unable to produce high-end steels for the automotive sector and the impact on jobs would be terrible,” it said. 

“More than half the Port Talbot workforce are engaged in the process of steelmaking through the blast furnace route and each of those jobs supports four more jobs in the supply chain and local community. Tata must clarify their intentions and engage with the unions because if necessary we are prepared to fight for the future of our industry.”

Tata Steel said it was in discussions with the government about “several options” but that no decisions had been made.

“[This includes] potential co-operation and participation from the government to create a sustainable decarbonised footprint for the future. Given prevailing market conditions and disruption caused by the Covid-19 pandemic, it is clear that our UK operations face structural challenges that need to be urgently addressed.”

The company is understood to be pushing for help with power costs, which are higher for industrial users in the UK than in many European countries.

Local Labour MP Stephen Kinnock said: “The blast furnaces in our Port Talbot works are the beating heart of the primary steelmaking process, and together with the steel unions I will be fighting tooth and nail to ensure that blast furnace-based steel production continues to be an integral part of the Welsh and British steel industry.”

The government said it had “put together a far-reaching package of support to help businesses through the coronavirus pandemic. We continue to regularly engage with businesses across all sectors, including those in the steel industry.”

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