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Tata Steel writes off UK steel ops; buyer interest lackluster


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Tata Steel writes off UK steel ops; buyer interest lackluster

The book value of TataSteel Ltd.'s lossmaking steel operations up for sale in the U.K. is "almost zero," London'sFinancial Times reported March 30, citingKoushik Chatterjee, the company's finance director.

Chatterjee reportedly said that the company has taken about £2billion of impairment in what he described as a "question of reducing an exposure."

Port Talbot in Wales is the biggest lossmaking asset in Tata'sU.K. portfolio. The company estimates that it will take another £2 billion to transformthe steel plant into a high-quality steel producer for advanced industries. Chatterjeeallegedly said that this was a massive number, but that one had to look at underlyingmarket conditions and macroeconomic factors.

According to a source close to the company, many interested partieshave looked into buying the troubled operations but have walked away due to thehuge losses recorded on a daily basis, the report said.

Chaterjee did not indicate for how long Tata will be able tocontinue supporting the plants but allegedly said that the company wants to selloff "in an orderly manner" as far as possible.

In January, it was revealed that Tata Steel will a further 1,050 workers, including750 at its Port Talbot plant, after dropping1,200 jobs at the Scunthorpe and Lanarkshire operations in England and Scotland,respectively, just three months earlier.

According to a report by Sky News, Liberty House has shown interestin buying Tata Steel's recycling operations but will not go for the company's blastfurnaces at Port Talbot and Scunthorpe. The international steel and non-ferrousmetals group run by Sanjeev Gupta recently boughtTata's Scottish rolling mills.

Separately, the FinancialTimes wrote that potential buyers of Port Talbot are few and far between, withGermany's ThyssenKrupp AGbeing one of the few candidates.

Tata bought the bulk of plants in a £6.2 billion deal when itacquired Corus in 2007. However, the company failed to improve efficiency in U.K.steel operations despite investing about £4 billion. Reportedly, Port Talbot alonegenerates some £1 million in losses per day as it has to pay for port facilities,while the company's Dutch Ijmuiden plant in comparison has its own port.

Surging imports from China and a general downturn in the steelindustry are among the factors weighing on the industry.

The latest chapter in the U.K. steel crisis prompted the BritishPrime Minister to cut short his holidays and hold emergency meetings to find a solutionfor what he called a situation "of deep concern."

In a bid to save "vital jobs," David Cameron promisedthat the "government will do everything it can, working with the company, totry and secure the future of steel-making in Port Talbot and across our country."

However, signs were that meetings March 31 did not lead to significantprogress as Cameron left for Washington in the afternoon. While not ruling out anything,Cameron stated that nationalization was not likely to be the "right answer."

Tata Steel is presently in the process of selling its long products business, based in Scunthorpe,to investment group Greybull Capital.