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
Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Fans take a selfie with Ed Miliband in Kempston, near Bedford, on Tuesday
election 2015
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power