Tata’s UK steel test is selling a biz few want

Bloomberg

Buyers for Britain’s biggest steel operations may be tough to come by.
Faced with a market flooded with cheap Chinese exports, Tata Steel Ltd. is planning to sell its U.K. business after several quarters of losses and 2 billion pounds of writedowns left the division with an asset value of almost zero. Steel prices have plunged to the lowest in a decade and in the U.K. higher wages and rising energy costs make the business harder to sustain.
“It will be very difficult to find a buyer for steel assets in the current market environment,” Seth Rosenfeld, a London-based European steel analyst at Jefferies International Ltd., said. “Trying to ensure the long-term competitiveness of this plant will remain a real challenge for any upcoming owner.”
European steelmakers are struggling with prices that have fallen by more than 50 percent since 2008 and a glut in global supply. Tata’s U.K. assets, once controlled by state-owned British Steel and bought for $12 billion a decade ago, include the giant Port Talbot works in South Wales. In total, the division employs about 15,000 people.

Huge Challenge
Liberty House Group said taking on the company’s iron and steelmaking facilities would present a “huge challenge,” according to a statement from Executive Chairman Sanjeev Gupta. The company, which is buying two of Tata’s plants in Scotland, said it’s interested in the U.K. processing operations. “Our engagement will depend very much on what Tata and the government are prepared to do to help save these businesses,” he said.
The risk of losing thousands of industrial jobs in an economically deprived region is already putting pressure on PM David Cameron. The government is considering “all options” and wouldn’t rule out temporary state control as a way to ensure sufficient time for a buyer to be found, UK business minister Anna Soubry said.
“I don’t believe nationalization is the right answer,” Cameron said in televised comments from his Downing Street office in London after presiding over a meeting of ministers on Thursday morning to discuss the crisis. “What we want to do is secure a long-term future for Port Talbot and for other steelmaking plants in the United Kingdom.”