The proposed 50:50 joint venture – thyssenkrupp Tata Steel – will lead to loss of around 4,000 jobs, but a union said it had been assured there would be no “reductions in production capacities” across the UK.

Almost 7,000 people are employed by Tata Steel across Wales.

That includes more than 4,000 in Port Talbot - the largest steel works in the UK.

Steel processing mills at Dalzell and Clydebridge were mothballed by Tata last year, threatening the loss of 270 jobs, before being snapped up by Liberty House.

Andrew Robb, chairman of Tata Steel Europe, said the announcement marked the latest step in “building a future for Tata Steel’s activities in Europe which is sustainable in every sense”.

Responding to the news, steel unions Unite, GMB and Community said: “The steel trade unions cautiously welcome this news and recognise the industrial logic of such a partnership.

“This would create the second biggest steel business in Europe which could deliver significant benefits for the UK.

“As always, the devil will be in the detail and we are seeking further assurances on jobs, investment and future production across the UK operations.

“As a priority, we will be pressing Tata to demonstrate their long term commitment to steelmaking in the UK by confirming they will invest in the reline of Port Talbot’s Blast Furnace No.5.

“We must also be assured that ThyssenKrupp’s pension liabilities will be ring-fenced with a cast-iron guarantee that UK steelworkers will never fund German pensions.

“We are now seeking an urgent meeting with Tata to fully understand their intentions for the UK in the context of the joint venture.

“We are also making arrangements to bring together senior representatives from across the UK to determine our approach to this significant new development.”