MUMBAI Tata Steel said on Tuesday it will cut about 400 jobs at its Port Talbot plant in South Wales, around 10 percent of the workforce, as it looks to reduce costs in order to compete more strongly in the EU's manufacturing industry.
Dealing a blow to the UK government's pledge to support British manufacturing jobs and diversify the economic base, Tata Steel Europe's chief executive, Karl Koehler, said in a statement the measures were "vital if we are to build a competitive future for our Strip Products business in the UK".
Koehler added that steel demand and prices were likely to be under pressure for some years.
Producing steel profitably in the UK has become increasingly difficult given shrinking demand plus higher energy, labour and logistics costs compared even with mainland Europe - itself struggling to compete with Asia and the United States.
Under the company's new management, Tata Steel has intensified cost cuts and focused on high-margin products to improve performance in Europe, its main market, where demand is down some 25 percent since the financial crisis.
Last year, Tata, Europe's number two steel producer, said it could cut around 500 jobs at sites in northern England, primarily Scunthorpe, under plans to restructure its construction and engineering supplies business.
"We will be seeking an urgent meeting with the company to discuss our concerns about manning levels and reiterate our opposition to any compulsory redundancies," Roy Rickhuss, chair of the UK trade unions' steel committee, said in a statement.
European steel prices are currently at around 4-year lows and prospects are dim, given a global surplus fed in large part by top producer China, where steel exports have risen 41.5 percent in the year to date.
In his annual budget, UK Finance Minister George Osborne offered to help UK manufacturing by extending a compensation scheme that offsets some of the industry's carbon costs out to 2020, and by freezing the country's carbon price floor.
Despite these measures, UK energy-intensive industries such as steel pay about 30 percent more for electricity than their main EU competitors and are subject to some of the highest carbon taxes in Europe.
Indian-owned Tata Steel became involved in Europe through its $13 billion acquisition of Britain's Corus in 2007.
(Reporting by Aman Shah in Mumbai and Maytaal Angel in London, Editing by Jeremy Gaunt)