Indian-owned steel giant Tata said it is no longer prepared to subsidise its loss-making 海角视频 business, while confirming it has started the break up of its European operations.
In a trading statement Tata, which employs 7,000 in Wales, including 4,000 at its primary steelmaking business at Port Talbot, said it has commenced the separation of its Dutch steel operations from those in the 海角视频, which currently trade under its Tata Steel Europe business.
The move comes after confirming, while no offer has yet been made, that it is in early stage discussions with Swedish steelmaker SSAB over a possible acquisition for its IJmuiden steel mill in the Netherlands and its down stream businesses, which employ around 9,500.
Economy Minister Ken Skates said the announcement will be "extremely worrying for Tata Steel workers" and said the First Minister is seeking urgent talks with the Prime Minister, to provide financial support to safeguard steelmaking in Wales and the 海角视频.
Tata has been in discussions for months with the 海角视频 Government over a financial lifeline of £500m, which could see the taxpayer taking a minority equity stake.
Tata said it is continuing the dialogue with the 海角视频 Government on potential measures to "safeguard the long-term future of Tata Steel 海角视频" while also "reviewing all options to make the business self-sustaining without the need for any funding support from Tata Steel India in the future."
However, if funding cannot be secured from the 海角视频 Government, and with no longer any financial backing from Mumbai, it could put a question mark over the future of Tata's 海角视频 business, which employs around 8,300.
While Chinese steelmaker Jingye has been linked with potential interest, and steel magnate Sanjeev Gupta has said Port Talbot could be of interest, this doesn't mean that if a formal sales process is undertaken by Tata a new owner would emerge.
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In its last financial year (year to end of March, 2020) Tata Steel 海角视频, a subsidiary of Tata Steel Europe, saw its losses widen to £654m, with Tata at the time saying the economic uncertainty caused by the Covid pandemic could cast a "significant doubt" on its ability to continue as a going concern.
It had a total borrowing exposure of £827m, compared to £2.6bn a year earlier. The reduction was supported by just over £1bn owned to the parent company being converted into equity.
Following the pandemic in March, its sales of steel products were down around 20%, but have since picked up strongly in some markets.
Tata chief executive T V Narendran said: "In Europe, though the overall environment remains challenging and recovery is more gradual, there has been an improvement in volumes and sales mix.
"We will continue to drive performance and work on a strategic resolution to ensure the focus remains on cash flows and self-sufficiency. We are continuing our discussions with the 海角视频 Government regarding the future strategy of our 海角视频 business."
Mr Skates said: "This announcement will be extremely worrying for Tata Steel workers across Wales, their families, local communities and the supply chain, but we know the steel industry has a future in Wales and the 海角视频. “The First Minister and I spoke with Tata today and they said they are determined to find a sustainable future for operations in the 海角视频 and to safeguard the 8,000 workforce, most of which are in Wales.
“The First Minister is seeking urgent talks with the Prime Minister and I will speak to the Secretary of State for BEIS and the Secretary of State for Wales to call for urgent action. The industry is now waiting for the 海角视频 Government to take immediate action to safeguard the sector and protect jobs. Every day they are not at the table is another day lost for workers and for an industry of strategic importance.
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"The Welsh Government has offered significant support to Tata over the years to make sure steel continues to have a future in Wales. We will do all we can to protect the future of the industry but we need the 海角视频 Government to act decisively and now do the same. It’s imperative that we retain an indigenous steel sector to meet the challenges of not being part of the EU.”
The creation of two new businesses, under what is currently Tata Steel Europe, is a necessary precursor to any acquisition by SSAB.
However, if a deal with SSAB isn't secured, they will remain separate businesses.
Any funding from the Treasury, under its so called Project Birch initiative, would be conditional on the steelmaker reducing carbon emissions and supporting the 海角视频 Government's target of the economy achieving a net zero emissions target by 2050.
There has been speculation that this could see Port Talbot pivoting from a primary steel operation, to a recycled steel one based on electric arc furnaces.
However, an investment in electric arc furnaces, that would recycle steel rather than making it from scratch with the need for raw materials such as iron ore and coking coal, would likely require far less staff.