Tata Steel is undertaking a two-stage transformation at its UK subsidiary, aiming to relaunch operations with a focus on green steel production. The first phase, expected to be completed within the next year, involves reducing fixed costs by £222 million to achieve positive EBITDA in FY26. The company has already made significant progress in reducing its fixed costs, from £995 million in the previous year to £762 million in FY25, and aims to bring this down further to £540 million in the current fiscal year.
The second phase of the transformation involves the commissioning of a 3.2 million tonne per annum electric arc furnace (EAF) in 2027, which will mark a major shift in the company’s steelmaking process. The EAF project is backed by the UK government, which will contribute 40% of the funding, amounting to £500 million. The total investment in the project will be £1.25 billion.
The EAF project is expected to cut on-site carbon emissions by up to 90%, reducing approximately 5 million tonnes of CO₂ annually. The new facility will also promote scrap recycling and green steel production. Tata Steel has secured planning approval for the Port Talbot EAF facility and construction began in July 2025. Once completed, it will be the UK’s largest low-carbon steelmaking plant.
Tata Steel has transitioned to a downstream model, relying on imported steel substrates from India, the Netherlands, and other sources, following the closure of its two blast furnaces at Port Talbot. The company has maintained delivery volumes at 2.5 MT and is working to ensure uninterrupted and reliable product supply to meet customer and market commitments.
The company’s cost optimization efforts include streamlining substrate procurement, upgrading IT infrastructure, rationalizing downstream operations, and eliminating corporate overheads. In Q1 FY26, TSUK reported revenues of £536 million and an EBITDA loss of £41 million, a significant improvement from the £80 million loss in Q4 FY25. The company expects its UK operations to achieve net profitability in FY26 and is working to address potential employment impacts and reskilling needs for the local workforce and supply chain ahead of the EAF commissioning.