Why is Tata Steel cutting 1,200 jobs in the UK?

Tata Steel, which is the biggest steelmaker in Britain, has said that it may cut nearly 1,200 jobs as a part of a restructuring plan amid struggling operations. In order to restructure and align operations, Tata Steel will be halting production of steel plate, which will see nearly 900 people losing their jobs in Scunthore in North England and 270 in Scotland, plus a small number at other sites, the company said in a statement. 

Scunthorpe, which produces steel mainly used in construction and infrastructure projects, is part of Tata Steel's loss-making long products unit, which the company is trying to sell. The unit employs about 6,500 people.

-- Why: Tata Steel says that the job cut decision is "in response to a shift in market conditions caused by a flood of cheap imports, particularly from China, a strong pound and high electricity costs," Tata Steel's European operations CEO Karl Koehler has said. The company has said that the decision comes after looking at all the other options. "We have looked at all other options before proposing these changes," said Karl Koehler, chief executive of Tata Steel’s European operations. 

-- Job cuts over the years: This is not the first time that Tata Steel is slashing jobs in the already struggling UK steel sector. In fact, it has cut thousands of jobs since it bought Anglo-Dutch producer Corus in 2007.

-- UK's struggling steel sector: The steel sector in the UK is struggling to stay afloat. The British steel sector currently employs fewer than 20,000 people directly, down from about 200,000 in the 1970s. It is estimated that for every direct steel sector job lost, three or four jobs are lost in sectors that depend on steelmaking.

-- The steel sector in the UK is hit by weak steel prices, after the liquidation of UK's second-largest steelmaker SSI UK was announced this month, which led to nearly 2,000 job losses.

-- On Monday, British steelmaker Caparo Industries went into administration, putting up to 1,700 jobs at risk.

-- In fact, Tata's decision now puts more pressure on British Prime Minister David Cameron, who said on Monday he would raise the issue of subsidised steel with China during a visit to Britain this week by President Xi Jinping.

“The prime minister can demonstrate that he is prepared to lead this commitment by stepping in this week and pressing the Chinese premier about the dumping of under-priced steel which is one of the major factors killing our industry,” said Gareth Stace, director of industry lobby UK Steel.

-- China, which makes nearly half the world's 1.6 billion tonnes of steel, is expected to export a record 100 million tonnes of steel to world markets this year to help address its spare steelmaking capacity - estimated at a hefty 300 million tonnes. More of a concern however, are claims that China is selling its steel below fair value thanks to government subsidies - an issue that British Prime Minister David Cameron promised to raise with President Xi on Monday.

-- The steelmakers and unions are up in arms with the government. The government is looking at some of their claims on business rates, energy costs and even unfair trade practices, but they say that without immediate and concrete action, there will not be much of a British steel sector to speak of.

-- Tata Steel share price dropped nearly 3% on the BSE on Tuesday after the announcement. The stock ended the day with a loss of 2.96 per cent at Rs 240.80 on the BSE. During the day, it went down by 3.28% to Rs 240. On the NSE, shares of the company dipped by 3% to Rs 240.80. The company's market valuation fell by Rs 713.13 crore to Rs 23,386.87 crore.

(With agencies)