Tata Steel said it was considering the sale of its business in the United Kingdom due to mounting losses and uncertain global market conditions.
It said in a statement that the Tata Steel board had advised its European holding company to explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts.
“Given the severity of the funding requirement in the foreseeable future, the Tata Steel Europe Board will be advised to evaluate and implement the most feasible option in a time bound manner,” the statement said.
It said the deteriorating financial performance of the UK subsidiary in the last 12 months was a cause of concern despite substantial financial support extended to the business and an impairment of more than 2 billion pounds in the past five years.
While the global steel demand, especially in developed markets like Europe has remained muted following the financial crisis of 2008, trading conditions in the UK and Europe have rapidly deteriorated more recently, due to structural factors including global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency, the statement said.
“These factors are likely to continue into the future and have significantly impacted the long-term competitive position of the UK operations in spite of several initiatives undertaken by the management and the workers of the business in recent years.”
The statement said that the Tata Steel Board also reviewed the proposed restructuring and transformation plan for Strip Products UK, but concluded that the plan was unaffordable, as it required material funding support in the next two years in addition to significant capital commitments over the long term.
Tata Steel bought Anglo-Dutch steelmaker Corus in 2007 and has since struggled to turn the business around in the face of a deteriorating market, slashing costs and jobs.
Tata also said in its statement that it is still in talks with investment firm Greybull Capital over the sale of its British long products unit, which makes steel for use in construction. Talks with Greybull were announced last year.