Until the United Kingdom's new Labour Party government approves a Rs 5,300 crore ($635 million) assistance offered by the previous administration to build a low-carbon facility, it is likely to order Tata Steel to ensure protection of local jobs at its Port Talbot plant.
According to a report by The Economic Times, new UK Business Secretary Jonathan Reynolds said, "De-carbonisation does not mean de-industrialisation. I will be working to safeguard jobs as part of negotiations, securing the future of steel-making communities for generations to come."
Tata Steel in September 2023 had declared its plans for a new low-carbon electric arc furnace (EAF) at its Wales factory which was estimated to be commissioned by 2027.
The EAF project requires a joint investment with the UK government of Rs 13,555 crore.
According to the publication, after its 2024 general elections and UK's government change, Tata Steel may be in a tough spot for negotiations and might have to instill some changes in the deal which it had signed with the earlier Conservative Party government.
With the transition to an EAF, Port Talbot which still operates with an old, traditional blast furnace, was expected to cut about 2,800 jobs.
During a meeting of the Tata Steel shareholders, the Tata Sons Chairman N Chandrasekaran had agreed that such a transition would be difficult, especially "for those employees who will not have a future with Tata Steel", the report said.
"The company is working with the government and with the Unions to make sure we do sufficient level of investment to be able to support them in their skill development, so they can have a better future," the publication quoted Chandrasekaran as saying.
The report also quoted Reynolds: "Our steel sector needs a government working in partnership with trade unions and business to secure a green steel transition that's both, right for the workforce and delivering economic growth. I invited steel union leaders into my department so we could sit round the table and discuss our shared commitment to achieve a sustainable, profitable UK steel industry."
An analyst at the Ambit Capital, Satyadeep Jain told ET: "We believe the new Labour government may try to renegotiate grant funding agreement (GFA) and push for more labour-intensive direct reduced iron (DRI)-EAF configuration instead of mini-mill/standalone EAF as agreed now."