Potential Tata Buyer’s Involvement In Swansea Bay Tidal Lagoon
By Paul Homewood
Thanks to Climanrecon and Stewgreen
A potential buyer for Tata Steel in the UK believes he could take over all the business without mass job losses.
Sanjeev Gupta, the head of the Liberty Group said he had "very encouraging" talks with the UK Government so far but there was still a lot of work to do.
Mr Gupta told the BBC he believed jobs at Port Talbot could be saved if at least 700 workers in its blast furnaces were retrained.
He now wants detailed talks with Tata and ministers.
Mr Gupta, who flew back to the UK on Monday evening, said it was a complicated deal, with a lot of components to it, from pensions to other liabilities.
Tata’s rolling mills and downstream businesses were relatively easier to tackle and he believed there was potential for expansion.
But he said the steel-making, heavy end of the business at Port Talbot was much tougher.
"The hot end is where we want to make the most dramatic changes," he said.
Mr Gupta said the idea was "we would look to transition from blast furnaces to arc furnaces, from imported raw material to domestically available scrap, from making carbon steel to making what we call green steel – melting and recycling scrap using renewable energy."
Mr Gupta talked about retraining the workforce and not making job losses but it would take time, while the building of arc furnaces to replace blast furnaces would take a year to 18 months.
"We’ve never undertaken anything which requires redundancies – I won’t undertake something which will require mass redundancies," he said.
"We will look to see how we can reposition the workforce from blast furnaces to arc furnaces. It will require a lot of planning and execution and it cannot be done overnight but be planned over a number of years."
Liberty has a £3.5bn turnover with 2,000 workers worldwide. It already operates a steel plant in Newport and is in the process of taking over two Tata plants in Scotland.
Mr Gupta said the most fundamental thing was to secure the hot end.
"These blast furnaces were constructed when some of the raw material was available domestically in the UK and also when there was demand in world market.
"In this excess capacity world, plants based on domestic iron ore or coal are going to be more competitive than plants like Port Talbot.
"There are many issues which have to be addressed but they are all addressable."
The plot, it seems, thickens!
The basic idea is sound enough, if not as straightforward as it appears. Melting scrap in an arc furnace is much less process intensive than the blast furnace route, which involves converting iron ore into pig iron, which then has to be processed in a BOS vessel to produce steel.
In other words, it is potentially a cheaper option, but this depends on the relative prices of iron ore, coke, electricity and scrap.
As we know, global prices for iron ore and coal are at rock bottom currently. We also know that electricity prices are high and rising.
A big increase in demand for scrap could also push prices up rapidly.
Traditionally, blast furnace/BOS processes were capable of producing much greater volumes of steel, which also affects the equation.
However, what is most interesting is that the aforesaid Mr Gupta also has many fingers in many other pies!
For starters, according to the South Wales Argos, he has a “substantial” financial stake in the Swansea Bay Tidal Lagoon project, which would like to charge us all four times the going rate for the electricity it produces. Ironically, Swansea is only a few miles along the coast from Port Talbot.
Somehow, I don’t believe Mr Gupta will propose to buy the power for his arc furnaces from the lagoon! Indeed, it is believed that one of his conditions will be for the government to waive all green levies.
And Swansea is not the only project he is involved in. Through another of his companies, SIMEC, he also owns the Uskmouth Power Station, also in South Wales.
The coal power plant there shut in 2014, but SIMEC are now planning to convert to biomass. A similar conversion at Lynemouth received a 15 year contract to supply at £105/MWh last year, three times the going rate.
It is deeply ironic that Mr Gupta is so keen to take huge subsidies for providing renewable energy, when they have caused so many problems for the steel industry he now wishes to take over.