Greybull emerges as favourite to buy Tata Steel’s Scunthorpe site, according to report

Investment firm Greybull Capital has reportedly emerged as a favourite to buy Tata Steel’s struggling UK-based unit, in a move that could offer some relief to Britain’s troubled steel sector.

Tthe Tata Steel Plant, Scunthorpe Photo: Anna Gowthorpe/PA Wire

The country’s largest steelmaker has been trying to sell its long products unit, which makes steel used in construction, since last year with increasing urgency as a global steel crisis intensified and prices hit decade lows

Two industry sources told the news agency Reuters that Greybull, which last year rescued British holidays and airline company Monarch, is favourite to buy the unit, and that Tata Steel will make a decision in January at the latest.

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The sources said there were two more parties interested, one of which was Leeds-based private equity firm Endless. Final bids went in around two weeks ago, one of the people said, cautioning that no deal was certain.

Greybull and Endless have declined to comment.

A Tata Steel spokesman declined to comment on the sale talks, saying only that the company is “still assessing all strategic options”.

Long products are used in construction, railways, shipbuilding and engineering.

Tata Steel has been trying to sell the struggling unit since last year, but was dealt a blow in August when Klesch Group, a global commodities producer and trader, publicly withdrew its interest, laying the blame on the British government.

One industry source said the current deal was probably worth less than £500m, and that the buyer would not take on any debt.

Tata Steel said in October it could axe about 1,200 jobs at its long products unit, which employs some 6,500 people across Europe with the majority based in Scunthorpe.

A month later, Tata Steel Europe Chief Executive Karl Koehler said the unit had no future within the company beyond the current financial year, ending in March 2016.

Britain has been severely impacted by a global steel sector meltdown, with nearly 4,000 UK steel jobs lost in October alone - equivalent to about one-fifth of the sector’s workforce.

Many of the country’s steelmakers lay the blame for their woes on UK and EU policy and on Chinese ‘dumping’ - selling products at below fair value.

On Monday, a UK parliamentary committee found that government action to help Britain’s steel sector was still not enough to secure the industry’s future.

UK heavy industry such as steel pays some of the highest energy costs and green taxes in the world.

Tata Steel has been forced to slash costs and cut thousands of jobs since 2007 when it bought Anglo-Dutch producer Corus for $13 billion, making its Europe’s second largest steelmaker.