Tata Steel Ltd expects a bigger support package from The Netherlands for restructuring its operations in that country compared to the aid being provided by the UK government, the company’s managing director and chief executive officer TV Narendran told Moneycontrol in an interaction.
"That work (of transition in Tata Steel Netherlands) is started so the proposal discussions are going on with the Dutch government and the size of the project in The Netherlands will be bigger than the size of the project in the UK because it's not just an EAF (electric arc furnace), we are also building a DRI (direct reduced iron) unit,” Narendran said.
There is also coverage of the raw material yards, so the scope is much bigger and hence the project size will be bigger, he said. “Hence the money required from the government will be bigger than in the UK. So that's the discussion going on and we hope that by December we will come to a conclusion on those discussions," Narendran said.
The Netherlands' plan
A new prime minister, Dick Schoof, took office in The Netherlands last month while Tata Steel had been in negotiations with the previous government for support over the transition plans, which include replacing blast furnaces with EAF and other sustainable measures, in order to comply with more stringent emission norms being put in place by the European Union, effective 2030.
The country's parliament had mandated the government to negotiate a transition plan with Tata Steel, having earlier debated whether The Netherlands needs a domestic steel industry.
Tata Steel's major European facility is located at IJmuiden in The Netherlands. Narendran said that the negotiations with the Dutch government are expected to be concluded by the end of the year.
He replied in the affirmative when asked whether the expected quantum of the support package from the Dutch government is more than the 500 million pounds that the UK government is providing, though he did not comment on the actual amount.
The Wales facility recast
In the UK, former Prime Minister Rishi Sunak's government agreed to a 1.25 billion pound restructuring deal with Tata Steel for the company's UK operations, with the British government slated to provide 500 million pounds as a grant for the restructuring. Tata Steel has planned to close the blast furnaces at its Port Talbot, Wales facility, and replace them with scrap-based electric arc furnaces over the next few years, while its downstream assets are expected to keep operating.
During the interaction, Narendran emphasised that the investments in the European steel industry do not necessarily come from a natural business case, but have been made possible due to support from governments, saying that the 1.25 billion pound investment in the UK had "no business case" without a support package from the government.
"...It is the same story for The Netherlands. On a standalone basis, there is no business case to put in the money, it depends on the amount of government support. In The Netherlands, like in the UK, the country needs to reduce its carbon footprint by 2030. So, that's why there is pressure on the government and from the government to conclude this fast. If we close a blast furnace in The Netherlands, we would reduce the carbon footprint in the country by 5 million tonnes," Narendran said.
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