By Alex MacDonald
LONDON--Tata Steel Ltd. (500470.BY) called on the U.K.
government to create economic growth and remove obstacles for a
recovery in manufacturing as the steelmaker embarks on a 240
million pound ($372 million) investment program at its Port Talbot
plant in South Wales.
Tata Steel, Europe's second largest steelmaker by capacity after
steel giant ArcelorMittal (MT), began Thursday a GBP185 million
project to rebuild Port Talbot's No 4 blast furnace and a
simultaneous project to install a GBP55 million gas cooling system
at the plant. Tata Steel is making the investment at time when
European steel demand is flagging due in part to the European Union
sovereign debt crisis and its impact on the EU's economy.
ArcelorMittal, the world's largest steelmaker, said Wednesday
that the situation in Europe and its potential impact on other
markets remains its single biggest concern. EU apparent steel
demand is forecast to contract 3% to 5% in 2012, more than
previously expected, due to the region's lackluster economic
prospects, ArcelorMittal said.
"We are demonstrating our commitment...by making major
investments for the future," said Dr. Karl Koehler, the chief
executive of Tata Steel's European operations. "But the economy is
facing grave challenges. We cannot be sure steel demand will be
sufficient by December to merit relighting this furnace
immediately," he said.
"I therefore call on all levels of government in the U.K. to
respond to our commitment by taking action to create growth in the
economy and by reversing policies that add unilaterally to the
U.K.'s disproportionately high energy costs," he said.
Without the right conditions to create more demand in the
economy, "the long-term prospects for the U.K. and our competitive
position in international markets remain bleak," said Michael
Leahy, general secretary of Community labor union, said.
The U.K. economy suffered a much larger contraction than
expected in the second quarter, shrinking 0.7% between April and
June due in part to weakness in the construction industry.
Carwyn Jones, first minister of Wales, said Wales will continue
to work closely with Tata no matter how long its takes for the
global economy to turn around.
Port Talbot operates two blast furnaces with a combined steel
production capacity of about 5 million metric tons a year. The
facility, which employs about 4,000 people, produces hot- and
cold-rolled coil steel products used in the automotive
industry.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
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