The company, which yesterday reported a 25 per cent fall in interim pre- tax profits to pounds 108m, pledged to maintain its final dividend. But analysts are warning of a sharp dividend cut next year unless there is a rebound in prices.
The company's shares were the worst performing stock in the FTSE-250, falling by 7 per cent to 101p having at one point been as low as 98p. The shares were floated for 125p ten years ago.
Sir Brian Moffat, chairman, said that prices of hot-rolled coil had fallen by as much as 30 per cent in the past three months. He blamed the steep decline on steel producers in Asia and Eastern Europe dumping production in Europe.
Imports from Japan, Korea, China and Eastern Europe have surged to take 20 per cent of the European market - double their normal level.
Faced with the collapse in prices, British Steel is accelerating its job reduction programme and shrinking its supply base more quickly with the aim of reducing its supplier bill by pounds 250m.
Job cuts will increase from 2,000 last year to 3,000 in the current financial year. British Steel is also considering a complete shutdown over Christmas of its four main steel plants in South Wales, Scunthorpe and Teesside.
Sir Brian said that selling prices had weakened for most steel products in August and September. "Subsequently, there has been a further deterioration in selling prices, a trend which if continued will lead to losses for the full year, particularly if pressure intensifies on sales volumes."
British Steel axed 1,400 in the first half of this year. But it has been forced to accelerate the job-cutting programme and the indications are that at least 1,600 jobs will go in the second half of the year from the company's 47,000-strong workforce.
The company also warned for the first time yesterday that the acceleration in job cuts would mean compulsory redundancies. Until now, the reductions have been achieved by voluntary redundancy, natural wastage and early retirement.
The slump in Asia has also hit exports to the region with sales only one-third of their levels 18 months ago. But British Steel has also been hit badly by falling demand at home from big customers such as the car, construction and engineering industries throttle back production because of declining export orders and home demand.
The weakening of the pound against the German mark has eased the financial pressure on British Steel a little in recent months. But Sir Brian said he would still like to see sterling at around DM2.60 to the pound against its current rate of DM2.79.Reuse content