Government must save Tata Steel before it is too late

This article was last updated on December 5, 2024

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Government must save Tata Steel before it is too late

Tata Steel IJmuiden must reduce CO2 and harmful emissions. A costly matter that requires billions of euros in government support. At the same time, Tata, like other major steel companies in Europe, is experiencing financial problems. This is due to cheap Chinese steel and high energy costs, which evaporate profit margins.

According to the trade union FNV and GroenLinks-PvdA, the government must therefore hurry up with support for Tata Steel before it is too late. They are working on an urgent letter that is in the hands of the NOS.

FNV chairman Tuur Elzinga fears the loss of tens of thousands of jobs at the company and the industries surrounding it. “It’s about the future of the manufacturing industry in the Netherlands. Something really needs to be done now. Otherwise, valuable jobs are in danger of being lost.”

Acute financial shortage threatens

The amount of money that Tata Steel has in cash to pay suppliers, raw materials and salaries has fallen sharply in the past year. The company suffered a loss of 556 million euros. About 600 jobs will therefore disappear at the steel factory and an additional 60 million euros will have to be cut in the coming months. Suppliers are being asked to reduce prices, it was reported the FD.

While China drives down prices with cheap steel, energy prices are rising in Europe. At the same time, the new US government, which will take office in January, is threatening to increase import duties on steel, among other things. All in all, European producers are pricing themselves out of the market worldwide.

Thousands laid off

At the German Thyssenkrupp, 5,000 jobs will disappear in the coming years. The steel group suffered a loss of 1.5 billion euros last year. Thyssenkrupp is now in doubt about a rapid switch to green hydrogen.

ArcelorMittal, the world’s second largest steel producer, is temporarily halting the development of ‘green steel’ at its factories in Belgium, France and Germany. Despite promised billions in state aid from Germany and France, according to ArcelorMittal there is currently no revenue model for green steel.

Step forward

Tata Steel Netherlands is also negotiating with the government about tailor-made agreements to partly switch from coal to green hydrogen. This involves billions of euros in state aid. Patience in the House of Representatives regarding this tailor-made agreement is running out.

“I think the government must now take a step forward. We want CO2 pollution to go down, we want to keep those jobs, but we also want to maintain the ability to make steel in the Netherlands,” says MP Joris Thijssen (GroenLinks-PvdA).

Without sustainability, Tata Steel Netherlands will face even greater financial problems after 2030 due to the European emissions system ETS. Emission allowances then become too expensive and are no longer available in sufficient quantities. Government support is needed to achieve sustainability.

Returns significantly reduced

This government support is partly dependent on rapid measures to improve the health of local residents in the IJmond. Tata is now regularly fined by the environmental agency for violating environmental regulations.

This concerns the emissions from the coke gas factory 2, where coke is made from coal. Steel is made from coke and iron ore. The coke gas factory is responsible for most of the nuisance in the Tata Steel area.

Without this factory, the company does not produce enough coke to keep the two blast furnaces running. Accelerated closure of the factory will result in less production or necessitate the import of coke. In both cases, the efficiency of the steel factory is significantly reduced, while a lot of money is needed to make the company more sustainable.

Business model for green steel

Green steel in IJmuiden brings the achievement of the climate goals closer and a basic industry is preserved in the Netherlands. But the billions can also disappear into a bottomless pit. This will happen if there ultimately turns out to be no revenue model for green steel at Tata Steel Netherlands.

According to some researchers a revenue model for green steel is not possible in the Netherlands. According to them, it would be better to move the steel industry to countries with a surplus of sustainable electricity and hydrogen, such as Spain and countries in Scandinavia.

But FNV chairman Elzinga is not impressed by the research and points to the electricity that the offshore wind farms will generate off the coast of IJmuiden. “We are standing in the wind here, it always blows here. We are used to some headwind, but we really have to keep pedaling now.”