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When India's Tata Steel acquired the Anglo-Dutch company Corus for 6.2 billion pounds ($8.82 billion) after an intense bidding war with Brazil's Companhia Sideurgica Nacional in 2007, little did it imagine that it would want to exit the U.K. completely in less than a decade after being battered by cheap imports from China and high costs, particularly for electricity.
With thousands of jobs at stake, the trade union Community dispatched a delegation led by General Secretary Roy Rickhuss to Mumbai ahead of a Tata Steel board meeting on Mar. 29. The workers at risk wanted to present their case directly, but it was also part of a bid to save what remains of the British steel industry.
Community has called on the British government to rescue the threatened plants. It put out an emotional video to explain how the loss of the industry will affect employment, lives, homes, and cultural identity. "We won't let it die," said one steelworker.
There had been a few encouraging signs. The British pound fell to a seven-year low on the U.S. dollar in February as investors fretted over the possibility of a British exit from the European Union, which will be decided by a referendum in June. Higher prices in Asia have also helped reduce the influx of cheap steel into Europe.
But analysts don't see the milder headwinds lasting, and the overall picture is discouraging. U.K. steel production in the first two months of the year was down 70% year on year, according to Swiss bank UBS.
After a board meeting lasting seven hours, Tata Steel announced next day that it wanted to divest itself of its uneconomic U.K. plants. Port Talbot, Britain's largest steelworks, is reported to be bleeding over $1.42 million each day. Tata Steel's decisions on its U.K. operations are by far the most consequential so far for Cyrus Mistry, who succeeded Ratan Tata as group chairman in 2012.
The activity cheered investors at least. On the day of the board meeting, Tata Steel shares lifted 1.4% in expectation of positive action, and 7% the following day when the selloff intention was announced. Overall, shares are currently only 2% down from a year ago, after hitting bottom at 201.35 rupees on Sept. 29. On April 1, the shares settled 1.8% down at the close of trading at 317.70 rupees.
Moody's Investors Service described the prospect of a sale of U.K. assets as "credit positive", and said it eases pressure on the company's operating performance. Offloading loss-making assets would help given weak demand and chronic oversupply, senior analyst Kaustubh Chaubal said.
Meanwhile, British Prime Minister David Cameron left a beach holiday early for talks on the political and economic impact of the collapse of the U.K. steel industry. Although on Mar. 31 he was dismissive of nationalization, he said nothing can yet be ruled out. Business Secretary Sajid Javid had to cut short a business trip to Australia almost as soon as he arrived there.
Rickhuss said the U.K. has been grappling with the global steel crisis for years. "It is astonishing that the government was so unprepared for Tata's announcement," he said.
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