Tata Steel on Wednesday signed a deal with Geneva-based global commodities major Klesch Group to sell part of its European operations as it battles weak prices and squeezed margins.
The value of the deal will be announced later.
“Tata Steel has announced the signing of a memorandum of understanding with Klesch Group to undertake detailed due diligence and negotiations for the potential sale of its long products Europe business and associated distribution activities,” Europe’s second-largest steel producer said in a statement.
Long products comprises bars, rods and wires, structural shapes and rails, and tubes.
The sale includes facilities in the UK, Ireland, France and Germany. The announcement, expected to lead to thousands of job losses, has infuriated worker unions, who said it “did not reflect well on Tata’s values”.
“We will now move into detailed due diligence and negotiations, though no assurance can be given about the outcome. We will engage with employees and other stakeholders and will consult trade union representatives and works councils,” said Karl Koehler, CEO, Tata Steel Europe.
The Tata Group is one of the UK’s largest employers. It employs 30,500 people in Europe including 17,500 in Britain. If the sale goes ahead, the number of employees in the company’s UK operations will be cut from 17,500 to 11,500.
Klesch’s long products division employs 6,500 people in the UK and Europe.
Tata Steel sources told HT that the operations being sold amounted to 3 million tonnes of long products out of 15 million tonnes in Europe.
After the sale, Tata Steel Europe will be left with strip products and speciality steels among other businesses.
Tata Steel moved into Europe less than a decade ago, with its $13-billion acquisition of Corus in 2007, but has since then consistently slashed costs and jobs to remain competitive. It has invested £1.2 billion in its UK operations in the last seven years.
In July, Tata Steel had announced restructuring proposals to improve competitiveness of its South Wales steel-making business that included the loss of 400 jobs at its plant in Port Talbot.
Europe’s steel industry is emerging from he most challenging periods in history due to shrinking demand, plus higher energy, labour and logistics costs.