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European steel merger puts more jobs on the line

European steel merger puts more jobs on the line
Issue Time:2017-10-10

London/Frankfurt — Plagued by poor earnings, Britain’s biggest steel plant, located in Port Talbot, is likely to be first in line for job and output cuts after the planned European merger of Thyssenkrupp and Tata Steel, industry sources say.

Germany’s Thyssenkrupp and India’s Tata Steel have signed a memorandum of understanding for a 50-50 joint venture that, if approved, would forge Europe’s No2 steel maker after ArcelorMittal, with sales of about €15bn.

The merger was driven chiefly by a need to tackle chronic overcapacity in Europe’s steel market and should conclude in late 2018. The company will begin reviewing its combined production network from 2020 onwards.

Industry analysts expect this to include further job cuts in addition to 4,000 already announced along with the deal, leaving open the question where the hammer will fall hardest.

Tata’s century-old steel works in Port Talbot, Wales, employs about 4,000 people directly and up to 16,000 more indirectly in a region with few other major industries.

It would be a prime target for cuts in the event of a steel market downturn after 2020, industry analysts said.

"They’ll only invest in the UK operations if they earn money," said Rakesh Arora, MD of Go-India Advisors, adding that "earnings will not be higher than they are now."

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