Production lines at Tata Steel's Llanwern factory in south Wales are running at about half capacity, with workers assigned to maintenance and cleaning tasks while machines sit idle, as a surge of cheap steel imports from Asian countries undercuts UK producers.
The company says there are not enough orders to keep the lines running full-time, a situation that threatens the viability of several UK sites making similar products and puts hundreds of jobs at risk. One insider said: "The line has been left running half empty, and the result of that is it won't last very long unless we can find a solution here."
New quotas worsen situation despite tariffs
In July, the government introduced new 50% import tariffs designed to protect against cheap steel from countries including China and India. However, for certain products such as the galvanised steel made at Llanwern, near Newport, the situation has worsened after the government increased the tariff-free quotas – the amount of steel that can be imported without paying the levy – for some countries.
India's allowance of galvanised steel rose from 98,000 to 125,000 tonnes, while Vietnam's more than tripled from 51,000 to 174,000 tonnes. South Korea was given an increased quota of 100,000 tonnes. The larger quota for India is understood to have been a last-minute move to help secure a trade deal with the country, as first reported by the Financial Times. World Trade Organization rules require comparable exporters to be treated equally, forcing the increases for Vietnam and South Korea.
Llanwern struggles to compete on price
Earlier this summer, Tata UK boss Rajesh Nair said he was "very concerned" about the new arrangement. Nearly two months later, Llanwern is struggling to compete on price and running at about half capacity. The factory produces about 600,000 tonnes of galvanised steel a year, nearly half the UK's total demand.
Galvanised steel is dipped in molten zinc to create a protective layer that can last for decades and prevent corrosion. It is widely used in items such as bridges, outdoor signs, and car bodywork. The company is understood to have met Blair McDougall, the minister for industry, two weeks ago to outline the scale of the problem.
Russell Codling, commercial director of Tata Steel, said: "Our world-class Zodiac galvanising line in Llanwern, south Wales, is already being significantly impacted by the new quotas, and that situation just isn't sustainable. The quotas have the power to turn this around and make us a truly sustainable business."
Green transition at risk
Tata is in the process of switching from its old blast furnaces in Port Talbot, south Wales, to a 3 million tonne electric arc furnace. The move will reduce carbon emissions but cost 2,000 jobs in the region when the blast furnace was closed in 2024. The process involves £1.25bn in investment, about £500m of which comes from a government grant.
A steel industry source warned that prolonged tariff pressure could endanger that switch: "If there is a prolonged impact across a number of Tata Steel's core sectors that affects the outputs of its downstream processing sites, that in itself could have a knock-on effect on the ability of its electric arc furnace and green steel making to transform the future of the business as they were hoping."
Alasdair McDiarmid, assistant general secretary at the Community union, said: "There is no doubt that the increase in duty-free steel imports from China and Vietnam poses a threat to our domestic steel industry, and at Llanwern our members are already feeling the impact. We will continue to call on the government to adopt a more robust approach to ensure that the long-term sustainability of Llanwern steelworks is not jeopardised. Llanwern is a crucial strategic site for the Welsh and UK steel sectors, supplying top-quality galvanised steel to the automotive and construction sectors. It is vital that the plant and its dedicated workforce have security for the future."
The government has previously said it will review the quota system before it changes again in July 2027. A government spokesperson said: "Our steel measure aims to strike the right balance between protecting domestic production and maintaining a secure supply, and final quotas were shaped by extensive engagement with industry. While category 4 imports are currently below the quota levels that have been set, we will continue to take industry feedback into account, monitor the impact closely and review the measure after 12 months."
