Page last updated at 12:07 GMT, Thursday, 14 January 2010

Steel workers hope for last minute lifeline

By Will Smale
Business Reporter, BBC News, Redcar

Corus Redcar
Steel has been made in Redcar for more than 150 years

A bitterly cold wind whips across a stormy North Sea into the giant steelworks at Redcar. It seems sadly apt.

Battered by globalisation and the worldwide recession since 2008, the future looks bleak for the Corus-owned site.

Barring a last minute reprieve, the facility - officially known as Teesside Cast Products - will be partially mothballed by the end of January or February, with the loss of 1,700 jobs out of the total 2,300.

The mothballing will crucially include switching off the facility's blast furnace, meaning the plant will no longer be able to make its own steel.

For a community that has been producing steel for more than 150 years, it could mark the sad end of an era that put Redcar on the map and defined the town's proud identity.

More pressingly, for a deprived area where alternative jobs are very hard to come by, the unions are warning of a dire and lasting impact.

"It will be devastating," says an impassioned Geoff Waterfield, chair of the Teesside multi-union workers' committee.

Redcar's production may be surplus to Corus' needs, but with steel demand set to rise again, someone else may see it being a viable operation
Patrick Flockhart, Steel Business Briefing

"There is no alternative work and there will be a mass repossession of people's homes. That's the future we are facing, it will be desperate.

"But we won't give in, and we are doing all we can to help avoid the mothballing happening. We'll fight to the very end."

Yet with the mothballing still on schedule to take place in the next two months, what has gone wrong at the Redcar plant, and how slim is the likelihood of an 11th hour salvation?

Broken sale deal

Redcar near Middlesbrough is one of Corus' three main UK steelworks, the others being Scunthorpe in North Lincolnshire and Port Talbot in south Wales. All three currently produce their own steel from iron ore.

Save Our Steel poster
The whole of Redcar is behind efforts to keep the steelworks open

What has made Redcar more vulnerable is that it predominantly only produces raw steel, while the other two have the facilities to go on and fashion steel in a more finished form.

As a result, for a number of years Corus has sought to sell the majority of Redcar's slab steel output to other steel producers around the world that had a shortfall in their own production.

Back in December 2004 Corus signed a deal that it hoped would guarantee Redcar's future until at least 2015.

Under the deal, an international consortium led by Italy's Marcegaglia agreed to buy about 80% of Redcar's production for 10 years.

However, the global recession sent demand for steel into freefall, causing a collapse in global steel prices. Consequently, the consortium pulled out of this agreement last April.

Corus subsequently confirmed in December that much of the site would have to be mothballed this month, as its losses at Redcar had reached £130m since April, and it had failed to find new long-term buyers for its output.

A Corus spokesman says the decision to partially mothball Redcar was a "direct result" of the consortium pulling out of the deal.

"We have done everything we possibly can to try to avoid mothballing the plant, but the international market for steel slab is exceptionally weak and we have been unsuccessful in securing a long-term strategic partner," he adds.

Indian factor

Yet with both global steel prices and demand now widely predicted to start rising again in 2010 as the worldwide economy continues to recover, staff at Redcar insist that the plant could soon be profitable again.

Price of steel

"Last year [with the global economy recovering] we thought that if we could make it until September we'd be fine." says worker Rob Hugill.

"That's why the mothballing confirmation knocked us for six. It doesn't make economic sense with steel prices rising again. We'd understand more if we were just about to go into a recession, but we are coming out of one."

China and India

However, Redcar is also at the mercy of the sea change in steel production in recent years - the vast growth in steel output in China and India.

Worker inside Redcar steelworks
Hopes remain that the plant may have a bright future

In addition to enjoying much lower labour costs, analysts say Indian and Chinese steel firms have another key advantage.

Their countries' booming manufacturing and construction sectors mean they have a vast customer base on their doorstep, and don't have to ship their steel halfway round the world to supply them.

With Corus being owned by India's Tata Steel since 2007, workers at Redcar say this is a problem they know only too well.

Some go further, saying they fear for the future of steel-making in the UK as a whole.

"Tata bought Corus for the expertise we have," says employee Kath Brown. "It wanted us for our knowledge and knowhow, which they can simply take back to India.

"Why produce steel here when they can do it much cheaper there?"

Potential buyer?

Analyst Patrick Flockhart, managing director of Steel Business Briefing, dismisses such concerns.

He says Corus still has a viable steelmaking future in its two home countries - the UK and Netherlands - to supply the European market - but that Redcar is surplus to its requirements.

Geoff Waterfield, chair of the Teesside multi-union workers' committee
Geoff Waterfield says the fight to prevent the mothballing will continue

"If you look at Corus' main sites, it doesn't need Redcar in addition to Port Talbot, Scunthorpe and its very efficient plant in the Netherlands," he says.

"So within Corus I don't think they have any other choice but to close it."

Yet Mr Flockhart adds that the Redcar plant could "potentially" have a viable future under another owner, and more importantly, that there are rumours of interested buyers.

"There are vague rumours - unsubstantiated - that South American steel group CSN might be interested, or a US investment group," he says.

CSN, Brazil's second-largest steelmaker has not commented on the speculation.

Mr Flockhart adds: "Redcar's production may be surplus to Corus' needs, but with steel demand set to rise again, someone else may see it being a viable operation."

While Corus is declining to comment on the possibility of a last minute sale of the site before the partial mothballing starts, it did announce on Tuesday of this week that it will "consider" delaying the mothballing from the end of January to the end of February.

It said it was responding to a union proposal that would allow it to maintain "a continuation of meaningful talks with a view to securing a positive future for TCP".

The unions at Redcar say they are keen to do everything in their power to facilitate any sale deal.

"We fear we are being kept out of the loop by the national Corus management," says Mr Waterfield.

"We don't know of any sale talks taking place, but we'll do everything we can to keep this facility open.

"It is not an exaggeration to say that the blast furnace here is the heart pumping the blood through the veins of the wider economy.

"If 1,700 people lose their jobs, the knock on impact on the wider economy will last for years."

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