Steel maker Corus delivers warning on UK energy costs

Corus, the Anglo-Dutch steel maker, warned yesterday that high UK energy prices would keep it at a long-term competitive disadvantage, undermining attempts to close the gap with its continental rivals.

The warning came as the company unsettled the market by forecasting a bigger-than-expected increase in its raw material costs this year, which will largely wipe out the benefits of higher selling prices. Corus expects raw material costs to rise by £400m this year to about £2bn, with £140m of that increase attributable to higher gas and electricity prices.

Philippe Varin, the chief executive of Corus, said its electricity charges would be £60 a megawatt hour in the fourth quarter of the year - more than twice the amount paid by continental rivals and four to five times what Russian steel makers pay.

M. Varin added that he saw this "structural disadvantage" lasting for at least the next three years. Corus is one of the country's biggest energy users, and is on course to achieve its three-year target of reducing operating costs by £680m by the end of this year. But the lower production costs which other steel makers have enjoyed have prevented it closing the "competitiveness gap" as much as planned.

The warning on raw material costs took the shine off a set of second-quarter figures in line with market expectations and further progress in reducing the group's debt burden. Corus shares fell by 2 per cent. Group operating profit for the three months to June halved from £267m to £129m.

But Corus said its underlying debt levels, once the £570m proceeds from the sale of its aluminium division were included, had fallen to £320m from a peak of £1.7bn five years ago while the overall trading environment for the second half of the year was expected to improve. The company has secured an increase in selling prices of 7-12 per cent for the third quarter and it has announced a further rise of 5-10 per cent for the fourth quarter. Despite this, Corus said it expected the benefit of higher prices to be largely offset by high input costs and lower steel production due to the relining of a blast furnace at its Ijmuiden plant in the Netherlands.

M. Varin refused to be drawn on the status of its joint venture talks with other steel makers. Corus has made no secret of its desire to forge an alliance with a steel maker in a low-cost, high-growth market such as Russia, Brazil or India. Following the Mittal-Arcelor merger there has been speculation that Corus itself might be taken over, with a number of Russian steel groups mooted as possible predators.

"We are actively pursuing the opportunities available to us. Whatever we do will take into account shareholder value," said M. Varin.

Although China will become a net exporter of steel for the first time this year, M. Varin said he did not expect a huge explosion in Chinese steel exports which could unsettle Western markets and depress prices.

Suggested Topics
News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
Life and Style
tech
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
tv
News
i100
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits