Review of Operations

UK & Europe

The operating strategy of Tata Steel is based on the aspiration to be a world steel industry benchmark in value creation and corporate citizenship.

In keeping with these objectives, Tata Steel Europe continues to focus on health and safety and a three-year plan has been developed that spans occupational safety, health and process safety. During 2008-09, particular emphasis was placed on contractor management. Building on the success of previous years, the lost time injury frequency rate for employees and contractors combined fell by a further 25% compared to the previous financial year. However, tragically there was one fatal accident during the financial year, in April 2008, with a third-party fatality to a customer’s employee in April 2009. These events underline the fact that there is a need for constant vigilance to ensure a safe working environment for all.

Tata Steel Europe has three main operating divisions – Strip Products, Long Products and Distribution & Building Systems. The activities of each division are organised into individual business units, with their own managing directors who, with their respective management teams, hold responsibility for the performance of that business. Europe is the principal market for the Group, accounting for 80% of total turnover in 2008-09.

After a strong first half of the year, during which operations were generally loaded to capacity across all divisions, the economic downturn affected operations severely in the second half of the year. In response, a company-wide programme, ‘Weathering the Storm’ was launched that aimed at offsetting the impact of reduced steel demand. Production was aligned with market demand and a cost-saving programme was initiated that generated estimated net savings of over £700 mn in the second half of the year. This involved a reduction in the use of third-party services, rationalisation of employment costs through reduced overtime and bonuses, and an alignment of the hedging position to new activity levels. In January 2009 the restructuring of European assets was accelerated through the launch of the ‘Fit for Future’ programme, which will result in around 3,500 redundancies and produce steady-state benefits of more than £250 mn per annum. The programme focusses on three areas: divestments, asset restructuring and a company-wide efficiency and overhead review.

Capital expenditure was lower by 13% this year over the last year, reflecting the slowing of investment as the impact of the downturn began to be felt. Nevertheless, two major schemes were completed during the year: a slab caster enhancement at Teesside and the replacement of the control system for the hot rolling mill at IJmuiden. Other major schemes in progress included:

1. Installation of a new continuous galvanising line and a 3-stand cold rolling mill at IJmuiden. Commercial production from both facilities has started. They will increase the company’s ability to serve the automotive market, as they can process speciality high-strength steel grades.
2. A BOS gas recovery plant and an energy management system are being set up at Port Talbot to reduce emissions and energy costs.
3. The conversion of the 7-stand finishing mill at IJmuiden with heavy bending and hydraulic gauge control has been implemented in order to improve profile, shape and thickness control.
4. A ladle furnace scheme at IJmuiden is underway as part of the development of steel making capacity at the works.