Tata Steel’s Llanwern galvanizing plant in South Wales is operating at around half capacity as increased availability of duty-free Asian steel weighs on orders and domestic competitiveness, according to The Guardian.
The plant, which produces around 600,000 tons of galvanized steel annually and supplies nearly half of UK demand for the product, has seen production lines operate below normal levels as customer orders remain insufficient to sustain full production.
The pressure has intensified following the UK’s new steel trade regime, which replaced the previous safeguard system on July 1. The new framework cut overall tariff-free steel import quotas by around 51pct to approximately 3.2 mln tons annually, while increasing the out-of-quota tariff to 50pct from 25pct. The measures are intended to protect UK steel producers from global overcapacity while maintaining access to imported steel.
However, the final quota allocations provided larger duty-free allowances for some suppliers of galvanized steel. India’s quota rose to 125,000 tons from 98,000 tons, while Vietnam’s increased to 174,000 tons from 51,000 tons. South Korea was allocated a 100,000-ton quota.
The higher allowances have increased import availability in a product category directly competing with Llanwern output. Tata Steel has warned that the current arrangement is putting significant pressure on the plant and is not sustainable.
The impact extends beyond Llanwern, with concerns that prolonged pressure on downstream operations could affect Tata Steel’s wider UK investment plans. The company is currently investing GBP 1.25 bln (USD 1.7 bln) in the transition of its Port Talbot operations to a 3 mln ton electric arc furnace, supported by around GBP 500 mln (USD 682 mln) in government funding.
The UK government said the trade measures are intended to balance protection of domestic steel production with maintaining secure supply. It plans to monitor the impact of the quotas and review the system after 12 months.
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