Corus to shut steel plant as offtake deal breaks down

Teesside, UK - Corus is preparing to mothball its Teesside Cast Products (TCP) plant in the North East following the failure of four international slab buyers to meet their obligations under an offtake agreement. The deal, signed in 2004, committed the consortium to buy just under 78% of the plant's production for ten years from 2004.

The breakdown of the deal has led Corus to start talks with employees and their representatives about mitigating the impact of mothballing the plant on the 1,920 TCP employees as well as future actions. Any decision to mothball is likely to lead to a very significant number of redundancies, the company warned.

The offtake consortium, which includes Marcegaglia SpA, Dongkuk Steel Mills Co Ltd, Duferco Participations Holding Ltd1 and Alvory SA2, hd agreed to buy their share of TCP¹s output at cash cost, accordin to Corus, which claims that the companies have already "benefited tremendously" from the deal.

"Despite this, last month the consortium unilaterally and unreasonably initiated moves to terminate the contract, thereby making the TCP operation unviable," claimed Corus, which is now taking legal measures to force the four consortium members to meet their contractual obligations. The stellmaker is also exploring other options to secure the future of the TCP facility.

"I am extremely disappointed that the consortium members have seen fit to take this irresponsible action," said Corus CEO Kirby Adams. "Their unilateral termination of a legally binding 10-year contract could bring to an end a fine heritage of steelmaking at Teesside."

Business Secretary Peter Mandelson, subsequently, expressed strong concern that unilateral termination of the offtake Agreement by Marcegaglia, Dongkuk Steel Mills, Duferco and Alvory, and the legal challenge to this should threaten closure of the entire plant.

"It is essential that Corus does everything it can legally, and with the Government's assistance, to reinstate the Offtake Framework Agreement. It is unacceptable that such a development should threaten jobs on such a scale, with such a potentially devastating impact on the area," said Mandelson. "The Government stands ready to do what it can to support the company. We are not prepared to reconcile ourselves to inevitable closure of this plant.

Meanwhile, One North East chief executive Alan Clarke said that Corus representatives, local MPs and Government officials are to lead a response group, which will meet this Tuesday at the Corus site. It will also include employment experts, business leaders, and the local authority.

"Our aim is to work with the company and other partners to see what can be done to secure a viable future for the plant and its employees. "We will also be planning the help to be given to workers who may lose their jobs," said Clarke. "These skilled workers have made the Tees Valley operation the success it has been and I believe their skills and commitment will be in demand from other employers in the area should redundancies have to be made."