Broken contract leads to mothball of Teesside plant

TCP’s Redcar Blast Furnace, Lackenby steelmaking and the South Bank Coke Ovens will be mothballed at the end of January 2010. Corus intends to keep open a number of operations, including the Redcar Wharf, Redcar Coke Ovens and some of the power generating capacity.

The partial mothballing will result in the loss of about 1,700 jobs, around 600 fewer than envisaged earlier this year.

Corus will continue to have a substantial presence in the Teesside area, employing more than 2,000 people at operations in Hartlepool, Skinningrove, the Teesside Beam Mill and Teesside Technology Centre.

The decision to partially mothball TCP follows strenuous efforts by Corus over the past eight months to secure a long-term future for the plant after the failure of four international slab buyers(1) to fulfil their obligations under a 10-year contract that they signed with Corus in 2004. This contract committed the consortium to buying about 80% of the plant’s production for ten years.

Since the consortium broke this legally-binding agreement, from which it made an estimated $800m profit, Corus has been diverting internal orders to TCP. The company has also been securing external orders on an ad hoc basis in a bid to keep the plant open while an alternative future for the plant was sought. This has cost the company about £130m. Operating a 3 million tonnes per year merchant slab plant is not sustainable without a long-term strategic partner.

Chief executive Kirby Adams said: “We are acutely aware that this will be devastating news for our employees, our contractors, their families and the local community. We extend our sincere gratitude to all of them, as well as to the management team and the trade unions on Teesside, who have all worked night and day to try and avoid this outcome.

“This is the last thing we wanted and we feel deeply about what is happening. Sadly, it has become unavoidable, through no fault of our people on Teesside.”

Corus will work with government agencies to do everything it can to ensure that the employees affected get access to the support and assistance available they need during this difficult time.