Even under these adverse market conditions, the Tata Steel Group has extended substantial financial support to the UK business and suffered asset impairment of more than 2 billion pounds in the last 5 years.
Deteriorating financial performance of its UK business has forced Tata Steel to sell its entire loss-making business in Britain.
The Board of one of the world's largest steel makers met on Tuesday to decide on the future course of action in a bid to steer the firm's embattled operations in the UK out of the rut, which has been facing tough times on account of cheap imports and weakening prices, among other factors.
"Following the strategic view taken by the Tata Steel Board regarding the UK business, it has advised the Board of its European holding company, Tata Steel Europe, to explore all options for portfolio restructuring including the potential divestment of Tata Steel UK, in whole or in parts," Tata Steel said in a statement late last night.
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, it added.
Last month in an unexpected turn of events, Tata Steel had said Karl Koehler, the CEO of its embattled overseas arm Tata Steel Europe, has resigned and the firm has appointed Chief Technical Officer Hans Fischer as its new chief.
Reviewing the performance of its European operations, particularly those in the UK, Tata Steel Board noted with "deep concern the deteriorating financial performance of the UK subsidiary in the last twelve months".
Tata Steel Board also reviewed the proposed restructuring and transformation plan for Strip Products UK, prepared by the European subsidiary in consultation with an independent and internationally reputed consultancy firm.
"Based on the review conducted, the Tata Steel Board came to a unanimous conclusion that the plan is unaffordable, requires material funding support in the next two years in addition to significant capital commitments over the long term, the assumptions behind it are inherently very risky, and its likelihood of delivery is highly uncertain," it added.
Therefore, the Board concluded that it would "not be able to support" the investment necessary to proceed with the proposed Strip Products UK Transformation plan, the firm said.
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.
"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," Tata Steel said.
Even under these adverse market conditions, the Tata Steel Group has extended substantial financial support to the UK business and suffered asset impairment of more than 2 billion pound in the last 5 years.
The company has also been in deep engagement with the UK government in recent months seeking its support to achieve the best possible outcome for the UK business, within the restrictions of State Aid Rules and other statutory limits, Tata Steel said.
These discussions are ongoing and will continue. Discussions will also continue with Greybull in relation to a sale of the UK Long Products business.
The UK government is also involved in the latter discussions, it added.
