Tata Steel: What do the steelworks mean to Port Talbot and the Welsh economy?

The town has had a steelworks since the earlier 20th century. Credit: PA Images

Thousands of steelworkers are at risk of losing their jobs at the UK's biggest steelwork in Port Talbot following plans to decarbonise its operations.

The UK Government has revealed a £500 million investment to help switch Port Talbot's two blast furnaces to electric arc furnaces that can run on zero-carbon electricity.

Unions fear the move could lead to around 3,000 job losses in the town.

The steelworks employ more than 8,000 people in the UK and is estimated to make the Welsh economy over £3 billion.

So how significant would further job losses in the area be and what is the importance of the steelworks to Wales?

What is the history of steel in Port Talbot?

It is difficult to overstate the connection between the steelworks and the Port Talbot community.

There has been a steelworks in the town almost since it first appeared on maps. The first plant was built by William Gilbertson in Port Talbot between 1901 and 1902.

As the industry grew and developed, so did the town. High-paid jobs, five-day work weeks and catered meals meant the number of people moving to the town soared. There needed to be more homes to house the steelworkers.

By 1951, the town had another new steelworks. The Abbey Works, now the Tata plant, was up and running and producing steel by1953.

The Port Talbot works soon became the biggest steelwork plant in Europe, with a workforce of 18,000 by the 1960s.

Corus Steel was bought by Tata Group in 2007. Credit: PA Images

In the late 1960s, the steelworks were taken into public ownership under the British Steel Corporation.

This company later became privatised as steel production in the UK started to slow down. The British Steel Corporation merged with another steel producer to create Corus Steel Limited in 1999.

The steelworks had employed 13,000 people in the '80s, but by the end of the decade, they employed just over 4,000.

In 2007, Corus Steel was acquired by the Indian multinational, Tata Steel Limited, for more than $10 billion.

The company rebranded as 'Tata Steel Europe' in 2011.

How significant is Port Talbot steelworks?

Around 8,000 people in the UK are employed by Tata. It puts £200 million into the economy in wages alone.

The Port Talbot works churn out 4.5 million tonnes of steel. Research from Cardiff University found that the total economic impact of Tata was £3.2 billion in Wales per year.

However, people in Port Talbot say it is the community which surrounds the steelworks which makes it so significant.

Tata and Port Talbot

Port Talbot's works have been fraught with difficulties as cheaper Chinese steel has began to dominate the steel market.

In 2012, Tata Steel announced it was cutting 900 jobs across the UK. Among the losses were around 500 in Port Talbot and Llanwern.

A year later, the Indian firm unveiled a refurbished £185 million blast furnace at Port Talbot, which was seen as a major vote of confidence for the plant.

Workers were dealt a big blow in 2016 when Tata announced around 750 job losses. More bad news came in 2019 when Tata Steel announced plans to cut another 1,000 jobs in the UK as part of wider restructuring proposals.

The Port Talbot works' owners asked for a multi-million pound loan from the UK government.

Tata Steel said the job losses were "designed to save its long-term future."

In April 2020, the multinational company went to the UK and Welsh Government to ask for investment to save jobs. They wanted a loan in the region of £500m after global orders slumped because of coronavirus.

Tata said: "A sudden drop in European steel demand after a number of steel-using manufacturers paused production, including European car manufacturers" had prompted it to slash production at some of its mills.

The UK Government's latest announcement sees their request for support answered.

The plan is to invest £500 million of taxpayer's money to switch Port Talbot's two blast furnaces to electric arc furnaces that can run on zero-carbon electricity.

What is a coal fire blast furnace?

Producing steel requires heating carbon and iron to an extremely high temperature.

These elements are mixed together in a huge vertical pipe. It's heated with preheated gas which is literally blasted into the pipe to create extreme heat.

To achieve such high temperatures, the Port Talbot plant uses large amounts of coal which is burnt to create a hard, grey material called 'coke'.

The byproduct of the process is damaging to the environment. Some of the main byproducts are carbon dioxide, nitrogen oxides and sulphur dioxide.

This makes the Tata Steel plant in Port Talbot the UK’s largest single carbon emitter.

The UK Government said its grant was "one of the largest government support packages in history.

What is the change?

Tata Steel is expected to announce, with the investment from the UK Government, that a new Electric Arc Furnace for greener steel production at Port Talbot will be up and running in three years.

Instead of using iron ore and coal, scrap steel is melted using an electric arc between two electrodes.

The proposed agreement would see the Port Talbot plant change, which requires fewer workers. Simply put, running an electric arc furnaces requires fewer steps and ultimately fewer people.

How are other countries decarbonising steel?

There are are currently 38 green steel projects in progress across the EU, nine of which are in Germany.

No country is yet producing steel using green hydrogen though Germany has one plant using blue hydrogen, meaning the gas is made from fossil fuels.

The UK has one project in the pipeline on the Humber which would use blue hydrogen.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know…