Millennium Post

Tata Steel may shut British plants in 6 weeks

Beleaguered Tata Steel may shut its British plants in six weeks if it does not find a buyer soon even as it is in talks to buy steel assets of one of German's largest producers. The Indian steel giant is only "going through the motions" of a sale and has privately given up hope of finding a white knight to rescue the loss-making unit and save 15,000 jobs, the Financial Times reported on Saturday, citing people familiar with the company's internal plans.

"Tata Steel could mothball plants in as little as six weeks. They have to go through the motions. But if they have not found a buyer by the next board meeting at the end of April, they will close it and they are not expecting anyone to come forward now," it said, citing a person. The company is likely to appoint bankers to run through the sale process in the next few days.

The Daily Telegraph said Tata is in talks to buy the steel assets of one of Germany's largest producers after quitting its operations in the UK. It has entered into discussions to merge its European business with ThyssenKrupp, to create one of Europe's biggest industrial companies.

Tata Steel had in January announced laying off 750 workers in a desperate bid to salvage its ailing Port Talbot steel plant in South Wales - the UK's biggest. This week, Tata Steel announced plans to sell its entire UK business as the company battles to control its "deteriorating financial performance", nine years after it had acquired Corus to become Europe's second-largest steel maker.

The board of one of the world's largest steelmakers met earlier this week to decide on the future course of action in a bid to steer its embattled operations in Europe out of the rut, which face supply glut, increase in cheap imports amid a continued weakness in demand in European markets. The board noted with "deep concern the deteriorating financial performance of the UK subsidiary in the last 12 months".

Tata acquired Corus, now Tata Steel Europe, in April 2007. The European behemoth was formed by a merger of British Steel and Dutch firm Koninklijke Hoogovens in 1999. In its 2007-08 annual report, Tata Steel said it has completed the long-term financing programme for Corus acquisition.

Of the total enterprise value of $14.2 billion, at the close of Corus acquisition process on April 2, 2007, the financing included about U$10.5 billion as bridge funding, the balance being applied out of Tata Steel's own cash and borrowings. 

However, shortly after the deal, an economic slowdown and continued weakness in European markets hit the company's sales, from which the steel maker is still trying to recover.

While the global steel demand, especially in developed markets like Europe remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently. 

This is mostly due to structural factors such as global oversupply of steel, increase in third-country exports into Europe, high manufacturing costs, continued weakness in domestic steel demand and a volatile currency.
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