By Maytaal Angel
LONDON (Reuters) - Liberty Steel has expanded its investment in the troubled UK steel sector by buying a second plant, but warned it could move planned work overseas if it could not secure a reliable and affordable energy supply.
The private company, part of Liberty Group, did not say where the plant was, nor how much it cost.
Sanjeev Gupta, executive chairman of Liberty Group, said his hope was to move equipment from the plant to Wales to increase steelmaking at the group's Newport plant to some 2 million tonnes and boost the 170-strong workforce by another 1,000.
Liberty Steel said the Newport plant, which began operations in October, had already turned a profit, and was on course to produce 600,000 tonnes of hot rolled coil this year.
However, the company said energy costs and concerns about security of supply could push it to move equipment from the new plant to India, depriving Wales not only of 1,000 new steel jobs but also of 3,000 or so jobs indirectly related to steelmaking.
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The Gupta family owns a power plant in Wales, but is awaiting further policy support from government before developing it further.
"If we had a cheap long-term energy source like tidal lagoon or if we are able to convert our power plant to biomass in the short term, that would give us energy security," Gupta said.
Producing steel profitably in Britain is difficult because of energy costs and green taxes that are some of the highest in the world, steep labour and logistics costs and high business rates.
Steel prices are also near their lowest in a decade, mostly due to cheap exports from top steelmaker China. Since October, 5,000 British steel jobs have been axed, equivalent to about a quarter of the sector's workforce.
Gupta's model for producing steel profitably involves importing cheap semi-manufactured 'slab' and re-rolling it into finished steel. He has also ensured Liberty's steel gets sold through his purchase last year of parts of Caparo Industries.
Upstream, Gupta hopes to re-open the electric arc furnace in Wales in order to make steel from scratch using scrap metal.
"The Caparo businesses were basically engineering business, we bought our customer so to speak. We're supplying growth industries like autos, defence and aerospace (but) we want to go end-to-end, from liquid steel to slab to coil to end products."
(Editing by Susan Thomas and Mark Potter)