Corus, the Anglo-Dutch steel maker, warned yesterday that the main risk to its nascent recovery lay in a sudden change in demand from China, now the world's largest user of steel.
The surge in steel consumption in China - up 20 per cent last year alone - has reduced overcapacity in the world steel industry to levels not seen in more than a decade, driving prices sharply higher.
Although Corus supplies virtually no steel direct to China, its chief executive, Philippe Varin, said the company was highly exposed to changes in Chinese demand affecting both steel and raw material prices.
He was speaking as Corus announced a reduction in operating losses last year to £66m compared with £393m in 2002, thanks to increased production, higher prices and a rationalisation programme which has seen thousands of jobs axed from its UK steel making plants.
M. Varin said Corus was entering discussions about the sale of its aluminium business and was also talking to third parties about a possible joint venture or equity partnership for its Teesside steel plant, which will become surplus to the group's requirements in 2006.
He refused to comment on reports that the Russian entrepreneur Alisher Usmanov, Corus's biggest shareholder with an 11 per cent stake, was seeking a seat on the board.
But M. Varin said that as far as he was aware, Mr Usmanov was supportive of the management's strategy and he would be speaking to him over the next few weeks as part of the company's regular dialogue with its large investors.
Sales last year were up 11 per cent to just under £8bn due to a 7 per cent increase in steel production to 17.8 million tonnes and a 7 per cent rise in average selling prices to £305 a tonne.
This more than offset an underlying increase in operating costs due to higher energy costs and increases in the price of raw materials such as coke, iron ore and scrap.
M. Varin has set the group a target of eliminating the 6 per cent "competitive gap" between Corus and its rivals over the next three years.
A £120m cost saving plan for the UK business, involving 1,300 job losses, is proceeding on plan and Corus has identified a further £350m of potential savings and revenue increases.
A third of the company's top 50 managers have been changed, resulting in a fall in the proportion of top jobs filled by UK executives from 72 per cent to 60 per cent.