German conglomerate ThyssenKrupp on Saturday (July 9) defended merger talks with Indian rival Tata Steel saying the consolidation of the sector in Europe was necessary due to the “difficult economic situation”.
The Indian firm said the previous day it was in talks with its German competitor and other unnamed groups to create a large European steelmaker but did not give further details.
Tata has been considering seven bids for its UK assets since putting them up for sale in March, citing a global oversupply of steel, cheap imports into Europe, high costs and currency volatility.
“We have always said that we consider a consolidation in the European steel sector necessary due to the very difficult economic situation,” Thyssen spokeswoman Nicola Roettger told reporters.
“The entire steel industry in Europe is fighting to continue to have a future in a difficult economic context,” she said.
“Very few European steelmakers are currently making profits,” she said.
Koushik Chatterjee, group executive director and Tata Steel’s executive director for Europe, said it was “too early to give any assurances about the success of these talks”.
“A potential 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,” he said.
But he stressed that any agreement, especially about the inclusion of the UK business in the joint venture, depended on talks with the British and Welsh governments and trade unions, and on resolving issues about pension liabilities.
The British government has been racing to help find a buyer for Tata’s business, which had accounted for about 16,000 jobs in total, many of them at the Port Talbot steelworks in Wales, the country’s biggest steel plant.
Last month, Tata agreed to sell its European piping business to Greybull Capital, a British-based family investment firm, safeguarding 4,400 jobs in Britain.
Former business secretary Sajid Javid had met Tata’s global chairman, Cyrus Mistry, in India earlier on Friday and reaffirmed the British government’s commitment to help.
He said the news that Tata was exploring a potential joint venture was “encouraging”.
“We will continue to work closely with Tata to find a long-term solution for sustainable blast furnace steel manufacturing in Port Talbot,” he said.
The government had previously said it would contribute hundreds of millions of pounds to any potential deal and take a stake of up to 25 per cent in the assets.
But Britain has been rocked by the shock vote in the June 23 referendum to leave the European Union, which sent the pound plummeting and plunged the country into uncertainty.
Chatterjee said Tata would also begin separate processes for the potential sale of the Speciality Steels business in northern England and the Hartlepool pipe mills.
“Both of these operations are largely independent of the strip products supply chain with their own specific characteristics,” he said.
“Tata Steel UK has already received interest from several bidders for Speciality Steels and the pipe mills in each case and a formal process will be commencing shortly.”
Roy Rickhuss, the general secretary of the trade union Community, said the delays and uncertainty over the sale were creating “frustration, even anger” among staff.
“This new approach means that uncertainty will continue for thousands of steelworkers and their families,” he said.
“It seems Tata believe this is in the best interests of sustaining steelmaking in Port Talbot and its downstream operations.
“But the test will come in the next steps that Tata takes and how the dialogue with ThyssenKrupp progresses.”