Tears as Teesside's furnaces go cold for the first time in 160 years

The mothballing of the Corus steel plant at Redcar later this week signals the end of an era for British industry

When Corus finally blows out the blast furnaces at its Teesside Cast Products (TCP) steel plant in Redcar at the end of this week, it is not only putting 1,600 workers out of work. The move will also mark the end of an era in Britain's industrial history. Teesside's relationship with steel began with the discovery of iron ore in the Cleveland Hills in 1850, and at its peak the local steel works employed more than 40,000 people. Although some steel processing will continue – for example, rolling mills and coke-making factories – the mothballing of the TCP plant will bring to a close nearly 160 years of steel-making in the seaside town.

The problems started last April when a consortium of four international steel companies – Marcegaglia, Dongkuk, Duferco and Alvory – pulled out of a 10-year deal to buy all of TCP's output after just four years. With recession decimating global demand and prices spiralling downwards, the cost of buying steel from TCP was simply too high.

Corus has spent nine months searching for a market for the plant's steel and more than $520m keeping Europe's biggest blast furnace running in the meantime. Now the company is pulling the plug. "Frankly, we can't go on," said Kirby Adams, the chief executive of Tata Steel Europe. "TCP will be out of iron ore this week and we have no external orders, so we have made the regrettable decision to mothball the plant."

Corus was keen to stress yesterday that it would still employ 2,500 people on Teesside. But local authorities estimate that up to 8,000 more jobs could be lost with the closure of TCP. Despite a Government pledge of £60m to help alleviate the impact of the shutdown, the mood is grim.

The Community trade union, which represents Corus workers, says the decision to mothball TCP is premature. It is threatening strike action over a move it claims "will place thousands of workers on the scrap heap, and has the potential to devastate the North-east".

The closure of TCP is disastrous for the region, but it is not an unequivocal emblem of a new decline in Britain's steel industry; the plant has long been a special case for Corus. It makes unfinished "slab" used by steel companies to turn into the finished "flat" or "long" products for the open market, and Corus's two other steel plants, in Scunthorpe, North Lincolnshire, and Port Talbot, West Glamorgan, already produce all that the company requires. Only the off-take agreement with the foreign consortium kept TCP going at all.

Even without the back-and-forth over TCP, Corus has still had a tricky year. It represents almost the entire British steel industry, and while 2007 saw UK steel production hit 14.3 million tonnes, by 2009 it had plunged to a record low of 10.1 million tonnes. But yesterday's financial results from Tata Steel – the Indian company that bought Corus for $12bn (£7.7bn) in 2007 – suggest that the worst of the recessionary slide may be over. The group's earnings before interest, tax, deductions and amortisation were up by 13.5 per cent year on year to $731m, due largely to a massive turnaround at Corus. From an adjusted loss of $250m in the second quarter, the European business managed a third-quarter profit of $142m thanks to strict cost-cutting, higher market prices and an improved product mix.

British steel is commonly characterised as an industry in terminal decline. It has certainly been a roller-coaster ride. After the war, steel production across Europe and the US grew continuously for more than two decades as industrialised economies rebuilt their infrastructures and consumer demand for steel-heavy commodities such as cars and white goods boomed.

The first restructuring began with the oil shock in the early 1970s. The recently nationalised steel industry had spent the preceding years on a spending spree, boosting capacity in the belief that demand would grow for ever. The oil crisis put paid to such optimism and what followed was carnage: multiple plant closures and massive lay-offs as the industry focused on efficient, modern facilities.

The medicine did work. By the mid-1980s, British Steel was highly profitable – sufficiently so for a successful privatisation under Margaret Thatcher – but did not stay in profit for long. A strong pound, locked in by the Exchange Rate Mechanism, dealt a devastating blow to both UK steel exports and also to manufacturing, which was the industry's main domestic customer. The previous nadir – before last year's crisis broke all records – was in 2002, when UK production dropped to 11.5 million tonnes, a far cry from the 18.5 million tonnes in 1989.

Steel production was still some way from pre-crisis levels when the latest global downturn struck, wiping an eye-watering 35 per cent off European demand last year. With the closure of TCP, and European demand not expected to make sufficient gains in 2010 to recover what was lost in 2009, the situation looks bleak, regardless of Corus's immediate financial position.

But the picture is not so simple. Although mass production will never return to post-war levels, there will always be some domestic demand for steel, both from manufacturers and, more importantly, from the construction industry – which will eventually recover from its current doldrums. "So long as there is a UK manufacturing industry, there is a future for the steel industry supplying into it," said Ian Rodgers, director of the industry body UK Steel.

Meanwhile, Britain's top-end expertise may make up for at least part of what has been lost in mass production. "The closure of TCP is taking a slug of capacity out of the UK that is never coming back, so we will see total steel production at a permanently lower level," Mr Rodgers added.

"But there are lots of companies making steels that few others in the world can make, and supplying into highly specialised niches both here and abroad. That will continue to be the way forward for the British steel industry."

Not just any old iron: The history of steel-making on Teesside

1850 Iron ore is discovered in the Cleveland Hills, prompting the building of Teesside's first blast furnace the following year. By 1868 there are 100 lining the River Tees.

1875 Steel comes to Teesside with the opening of the Bessemer steel plant in Middlebrough.

1902 The first integrated steelworks, turning iron ore to finished rolled steel, is built at Cargo Fleet on Teesside.

1932 The Sydney Harbour Bridge, built of Teesside steel from Dorman Long, opens in Australia.

1949 The industry is nationalised by Clement Attlee, only to be privatised again by the Tories in the 1950s.

1954 Dorman Long builds the world's most advanced steel plant at Lackenby, near Redcar.

1967 The industry is re-nationalised under Harold Wilson's government to form the British Steel Corporation.

1979 The largest blast furnace in Europe is opened at Redcar, as steel production on Teesside is concentrated in a single factory during the massive restructuring of the industry in the 1970s.

1989 The Thatcher government privatises the steel industry again, forming British Steel.

1999 British Steel merges with Koninklijke Hoogovens to form Corus.

2007 Corus is bought by India's Tata Steel for $12bn.

2010 Teesside Case Products closes, ending the region's steel-producing history after nearly 160 years.

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