Calcutta, July 8: Tata Steel today junked the ongoing sale process of its UK operations following political and economic uncertainties over Britain's referendum to leave the EU and entered into fresh talks to form a joint venture with German steel maker ThyssenKrupp AG.
The board of Tata Steel, which held a marathon meeting in Mumbai today after talks with British business secretary Sajid Javid in the morning, indicated that it would look at a broader collaboration for the entire European operations, including Ijmuiden in the Netherlands.
"We have initiated conversation for a strategic collaboration for our European businesses. A strategic combination of strip products businesses offers the best prospects to create a premium, world class strip steel business with the scale and scope of capabilities to compete successfully on the global stage," Koushik Chatterjee, group executive director and Tata Steel's executive director for Europe, said in a late night statement.
Industry sources said Tata Steel had engaged in parallel negotiations to sell the whole of its hugely loss making UK business and form a separate joint venture for the moderately profitable Netherlands operation. The name of ThyssenKrupp, one of the profitable steel players in the world, had come up then, but the Tatas had declined to comment.
However, several factors changed the scenario after it announced the exit from the UK in late March. Steel prices rebounded from record lows, iron ore prices remained depressed and duties were imposed on cheap Chinese imports, making the British operations less vulnerable. Moreover, the UK also pledged "millions of pounds" to the new owner, prompting speculation whether the same would also be available to the Tatas if they changed their mind and retained the business, saving 11,000 jobs.
Following the Brexit vote, the pound hit a 31-year low against the dollar, making UK steel more competitive in the export market.
All these factors, along with doubts sowed in the minds of the bidders - there were seven, including JSW Group from India - for the UK business put a halt to the sale process and the Indian company decided to include the British operations into the ambit of joint venture discussions.
"It is too early to give any assurances about the success of these talks. Such success, especially the inclusion of the UK business in the potential joint venture, would depend on several issues, including finding a suitable outcome for the British Steel Pension Scheme, successful discussions with UK trade unions, and the delivery of policy initiatives and other support from the governments of UK and Wales," Chatterjee added.
The company also said that as part of the revised strategy, it will initiate a separate process for potential sale of the south Yorkshire-based Speciality Steels business and the Hartlepool Pipe Mills (other than the 20-inch tube mill).
"Tata Steel UK has already received interest from several bidders for Speciality Steel and Pipe mills in each case and a formal process will begin shortly," Chatterjee added.
