Corus to cut 1,700 jobs in Teesside

Steel group fails to secure rescue plan after losing major contract in April

The UK steel group Corus is to close operations in Teesside, triggering 1,700 job losses, after a consortium of buyers pulled out of a major contract earlier this year.

Corus, which is owned by the Indian group Tata Steel, has been exploring various options to salvage the plant, including selling all or part of it, and forging industrial partnerships in recent months. But after a rescue plan failed to materialised, the management yesterday said it could no longer continue to support the plant's losses and moved to "mothball" parts of the business. Workers at the plant were informed of the scale of the job cuts yesterday morning, which bring the total losses announced in the UK by the company this year to 6,700.

Kirby Adams, the chief executive of Tata Steel Europe, said: "We are acutely aware that this will be devastating news for our employees, our contractors, their families and the local community."

Lord Mandelson, the Business Secretary, said he shared the bitter disappointment" of those affected, saying the Government had been working with Corus all year to resolve the situation. "Finding a longer term solution, I'm afraid, has eluded us," he said. He pledged the Government's help for the individuals affected, including potential retraining schemes.

The crisis erupted in April after four international steel slab buyers pulled out of a deal signed in 2004. The Italian group Marcegaglia; Dongkuk Steel Mills of South Korea; the Swiss-Italian Duferco Participations and Alvory, a subsidiary of Ternium in Luxembourg, had agreed to buy 80 per cent of the Teesside plant's production until 2014.

Corus failed in a legal attempt to get the consortium to fulfil its obligations, but is seeking hundreds of millions of pounds in damages in a case that could drag on for years. Mr Adams said yesterday the companies that had walked out should see the effect on Teesside and "hang their heads in shame".

"Since the consortium broke this legally binding agreement, from which it made an estimated $800m profit, Corus has been diverting internal orders to Teeside Cast Products," the group said. It has also been securing external orders "in a bid to keep the plant open while an alternative future for the plant was sought. This has cost the company about £130m".

Corus said operating a plant that makes 3 million tonnes of merchant slab a year was without a long-term strategic partner was unsustainable. "With the global financial crisis, overcapacity in steel and decline in manufacturing activity, the interest in a facility like this at this moment is simply not here," said Mr Adams.

The Redcar Blast Furnace, Lackenby steelworks and the South Bank Coke Ovens will all be mothballed, with operations ceased but facilities maintained in readiness for a possible restart, at the end of next month.

The group said the job losses from the partial mothballing were 600 fewer than had been envisaged earlier in the year. Corus will keep the Redcar Wharf, Redcar Coke Ovens and some of the power-generating units open. It said there would still be a "substantial presence" in the Teesside area, with a staff of more than 2,000 people.