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Any funding lifeline deal for Port Talbot Steelworks cannot be conditional on a shift to arc furnace production which could put thousands of jobs at risk, say Economy Minister Ken Skates.

While the Welsh Government said it stands ready to provide financial support for Tata Steel º£½ÇÊÓƵ operations in Wales, where it employs around 8,000 including 4,000 at its primary steelworks in Port Talbot, the º£½ÇÊÓƵ Government, with its significant fiscal firepower, is continuing talks with Tata over a £500m funding lifeline.

It comes as the loss-making steelmaker has reported a fall in demand for its steel products of around 20% due to the pandemic, against the backdrop of over supply of steel globally that predates Covid.

Under its Project Birch initiative the º£½ÇÊÓƵ Government is exploring providing funding to major employers in sectors deemed of national significance such as steel.

So far the only business to have received financial backing under Project Birch is Spanish-owned Celsa Steel, which employs around 800 at its recycled steel mill in Cardiff with a repayable loan of £30m. Celsa has also received a loan of £2.9m from the Welsh Government.

While it has received financial backing from its Indian parent company, Tata º£½ÇÊÓƵ Steel, which is a subsidiary of Tata Steel Europe, is looking to secure a £500m funding deal with the º£½ÇÊÓƵ Government, as part of efforts to sustain the business for the long-term.

Conditions of any funding from the º£½ÇÊÓƵ Government, which could potentially see it taking an equity stake in the steel business, are likely to seek a reduction in carbon emissions and supporting its target of the economy achieving net zero emissions by 2050.

This has led to speculation that any funding could also be conditional on Port Talbot pivoting from a primary steel operation, to a recycled steel one based on electric arc furnaces.