Tata Steel’s Europe operation is facing financial headwinds as the economic impact of COVID-19 pandemic further weakens steel demand in the region. To tide over these unprecedented circumstances, Tata Steel Europe has sought £500mn ($543.15mn) funding from the UK and Welsh governments.
European steelmakers have cut production after many auto manufacturers in the region shut plants and construction activities stopped due to restrictive measures put in place to curb the spread of the virus. Steelmakers face huge losses as new orders are down by nearly 75pc, according to European Steel Association (Eurofer).
The British government has introduced a Coronavirus Large Business Interruption Loan Scheme to help UK-based businesses survive the crisis. The scheme offers loans of up to £50mn to companies with a turnover of more than £45mn. Tata Steel’s funding request is 10 times more than what is offered by the government and the company is in talks with ministers and government officials to raise the funding cap and help save its operations and around 1,250 jobs.
Tata Steel Europe’s parent company Tata Sons has expressed its inability to help the company which has been unable to make profits since its acquisition in 2007. The parent company has prioritised funding for other subsidiaries which including Tata Motor’s European venture Jaguar Land Rover (JLR).
Amid the COVID-19 lockdown, Tata Steel Europe is operating all its four blast furnaces at a reduced level to adjust with a significant drop in demand. The company has two steelmaking plants, one in Ijmuiden, the Netherlands, and other in Port Talbot, Wales.
Tata Steel’s gross debt stood at Rs1,008.16bn ($13.33bn) as of March 2019. Tata Steel reported a consolidated net loss of Rs12.28bn in Q3FY2019 compared to a net profit of Rs17.53bn in the prior year quarter.
In Q4 FY2020, Tata Steel Europe produced 2.56mn mt of liquid steel (provisional figures) compared to 2.73mn mt in the prior year quarter, down by 6pc. Sales volume was down 8pc to 2.37mn mt in the quarter, as reported by Davis Index. Provisional steel production for the full year FY2020 was 10.18mn mt down from 10.30mn mt in FY2019, while sales volume totalled 9.27mn mt, down by 4pc from a year ago.
In mid-April, most credit rating agencies downgraded steelmakers, including Tata Steel, citing the adverse impact of the COVID-19, as reported by Davis Index. The European steel industry is facing