Tata Steel hopes to conclude agreement with Dutch government this fiscal
Tata Steel chairman, N Chandrasekaran, said in the company’s annual report that discussions with the Dutch government regarding the decarbonisation strategy for Tata Steel Nederland had begun | File image
A binding agreement between the Dutch government and Tata Steel on the transition to low-carbon steelmaking at its Ijmuiden plant is expected to be concluded this financial year.
Tata Steel chairman, N Chandrasekaran, said in the company’s annual report that discussions with the Dutch government regarding the decarbonisation strategy for Tata Steel Nederland had begun.
The decarbonisation will be implemented in two phases, with one blast furnace being replaced before 2030 and the second one thereafter. “For the first phase, we have outlined a plan to transition to green steel production by 2030 through the direct reduced iron (DRI) and electric arc furnace route. The DRI, set to initially operate on natural gas, will seamlessly transition to hydrogen when it emerges as an accessible and economically feasible energy source,” he said in his message to shareholders.
“We hope to conclude an agreement in this financial year,” Chandrasekaran added.
The discussions with the Dutch government centre around financial and policy-level support.
Green steel plan
The Green Steel Plan, or the blueprint for the transition at the 7 million tonne plant at Ijmuiden, Netherlands, was presented to the Dutch government by Tata Steel in November 2023.
On March 28, 2024, the Dutch cabinet confirmed that the government was willing to support the proposal from Tata Steel and had given a mandate to negotiate.
The Green Steel Plan entails significant investment by Tata Steel and can succeed only with policy and financial support from the government, the company’s annual report mentioned.
Media reports earlier this month indicated that the Netherlands may provide up to 3 billion euros to support the transformation at the Ijmuiden plant. The company clarified in a stock exchange filing that discussions with the Dutch government on proposed decarbonisation were ongoing, adding that it may be premature to draw any final conclusions.
Election impact on Port Talbot
The transition to low-carbon steelmaking in Europe has been a focus for Tata Steel. In the UK, the company reached an agreement with the Conservative government in September 2023 for the transition from blast furnace to electric arc furnace (EAF) at Port Talbot in South Wales.
The project cost is pegged at 1.25 billion pounds, inclusive of a grant from the UK government of up to 500 million pounds. However, the deal is caught in political crossfire ahead of the general elections in the UK on July 4, as the restructuring at Port Talbot puts 2,800 jobs at risk.
The Labour party wants Tata Steel to halt its plans and wait until the general election to engage in talks with the government, indicating that there is a ‘better deal to be made’.
Trade union Unite announced strike action from July 8. Around 1,500 workers in Port Talbot and Llanwern will begin an all-out strike over plans to cut 2,800 jobs and close its blast furnaces.
In a statement on Friday, Tata Steel indicated that if the safety and stability of operations were put at risk, it would be forced to accelerate the closure of blast furnaces and associated plants.
The company also pointed out that it was losing 1 million pounds a day in the UK as existing steelmaking assets were nearing the end of their life and were operationally unstable, causing unsustainable losses.
European Challenge
The financial year 2023-24 was challenging for Tata Steel’s European operations. Tata Steel Europe’s turnover stood at Rs 78,144 crore in FY24 compared to Rs 90,300 crore in FY23. Ebitda loss at Rs 7,612 crore during FY24 was lower than the Ebitda profit of Rs 4,632 crore during FY23.
The company attributed this to the impact of relining a blast furnace in the Netherlands, coupled with lower market spreads.
Tata Steel UK’s performance was impacted by the end-of-life assets apart from subdued market conditions.
Tata Steel Europe’s net loss stood at Rs 19,603 crore in FY24 compared to a net loss of Rs 3,263 crore in FY23.
First Published: Jun 23 2024 | 2:15 PM IST