Around 2,000 jobs are at stake.
Corus, a unit of Tata Steel, today announced that some big buyers of slab had terminated an offtake agreement for its Teesside Cast Products (TCP) plant, putting under cloud the future of the plant.
The world’s sixth-largest steelmaker said it might have to mothball TCP, in northeast England, which employs 1,920 people.
“Two thousand jobs are in jeopardy and a community distressed,” Bloomberg quoted Corus Chief Executive Officer Kirby Adams as saying on a conference call. “Today’s decision is the direct result of four companies trying to terminate a 10-year contract which is not even half-way through.”
The four companies are Marcegaglia SpA, Dongkuk Steel Mills Co Ltd, Duferco Paticipations Holding Ltd and Alvory SA.
The company has started talks with employees and their representatives about what can be done to mitigate the impact of mothballing the plant on the employees and the future course of action. “Any decision to mothball is likely to lead to a very significant number of redundancies,” said a company release.
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Under the offtake agreement with Corus signed in 2004, the consortium committed to buy just under 78 per cent of TCP’s production for 10 years. “Last month, the consortium unilaterally and unreasonably moved to terminate the contract, thereby making the TCP operation unviable,” said a Tata Steel press release.
Earlier this year, as part of a restructuring initiative, Corus entered into a memorandum of understanding (MoU) for divesting a majority stake in TCP. Under the MoU, Marcegaglia would have 56 per cent stake, South Korea’s Dongkuk 24 per cent, while the remaining 20 per cent would be with Corus.
A Tata Steel spokesperson said the deal for selling TCP was not connected with the offtake agreement, which was a more critical and immediate issue.
The deal was valued at around $480 million or 319 million pounds. Last month, B Muthuraman, managing director, Tata Steel said in Kolkata that Tata Steel would save one billion pounds from restructuring Corus. However, the company could now miss the target with the TCP deal falling through. “Savings of one billion pounds does not include TCP sale,” said a Tata Steel spokesperson.
In the last quarter, Corus announced a host of steps to improve its position, the key features of which included divestment, asset restructuring, and overhead review. The measures put 3,500 jobs at risk, without taking TCP into account.
Industry sources said TCP was unviable because the cost of making slabs in India was much less. Most steelmakers, including Tata Steel, are pursuing a deintegrated model, where primary steel-making will in countries rich in raw materials while the finishing facilities will be closer to the market.