S Kalyana Ramanathan / London December 05, 2009
Unavoidable, says management; unions demand government rescue.
After months of attempts to save its plant in Northeast Britain, Tata Steel-owned Corus finally gave in to the financial pressure and decided to "mothball" part of its operations at the Teesside Cast Products (TCP) unit, resulting in loss of 1,700 jobs. The losses are, however, 600 lesser than originally envisaged.
The mothballing was forced when a consortium of buyers (from Europe and Asia) prematurely terminated a 10-year contract with Corus entered into in 2004. The consortium of Marcegaglia SpA, Dongkuk Steel Mills Co Ltd, Duferco Participations Holding Ltd (through Steel Invest Trading SA) and Alvory SA (a wholly owned subsidiary of Ternium SA) had originally agreed to buy nearly 80 per cent of the plant’s capacity over 10 years.
The estimated redundancy costs on account of the mothballing will be £80 million, according to Kirby Adams, chief executive of Corus.
The mothballed unit accounts for about 15 percent of Tata’s European steelmaking capacity. Excluding Teesside, Corus is producing at 75 percent of capacity. The Anglo-Dutch company Corus was bought by Tata Steel in 2006 (announced in January 2007) for $12 billion.
According to a statement issued by Corus, TCP’s Redcar Blast Furnace, Lackenby steelmaking and the South Bank Coke Ovens will be mothballed at the end of January. Corus intends to keep open a number of other operations.
The Corus spokesperson later clarified that technically the plant has not been "closed". Mothballing would mean the shut units could be put back into operation when the right buyer with a sufficient order size is found to warrant such a move. Said Kirby Adams, “This is the last thing we wanted and we feel deeply about what is happening. Sadly, it has become unavoidable, through no fault of our people on Teesside.”
The statement from the company further said that since the consortium broke this legally-binding agreement, from which it made an estimated $800 million profit, Corus has been diverting internal orders to TCP. The company has also been securing external orders on an ad hoc basis to keep the plant open, while an alternative future for it was sought. This has cost the company about £130m. "Operating a 3 million tonnes per year merchant slab plant is not sustainable without a long-term strategic partner," the statement added.
A Corus spokesperson later said all attempts would be made to ensure workers who will lose their jobs due to this latest decision get support, either through relocation to another site or in securing a job elsewhere. "All options will be explored," the company spokesperson said.
Since negotiations to make the consortium honour the contract failed, Corus has been pursuing legal options. However the company refused to discuss the status of the case.
Unite's (union) joint general secretary, Derek Simpson said: "This is a dark day for British manufacturing. Unite will do everything possible to prevent this closure from going ahead. The government must now act to save Teesside as decisively as it acted to save the banks last year. The plant needs urgent financial support to secure a future for the workers and prevent its closure."
Keith Hazlewood, GMB (union) National Secretary, said: "What a terrible contrast, with 1700 workers losing their jobs on Teesside, while multi-millionaire bankers gorge themselves at the expense of the tax payers.”