Corus may shut down UK plant due to contract termination
The Tata Corus may have to steel itself for some tough times. First, falling demand forced the company to cut production and now, it is looking at nearly 2,000 employees becoming redundant. Corus’ Teesside plant may have to be shut down, as nearly 70% of its off-take agreements are with four international players who have terminated their contracts.
CNBC-TV18’s Archi Damania reports:
The future of steel giant Corus’ Teesside plant looks bleak. The plant may have to be shut down, as nearly 70% of its off-take agreements are with four international players who have terminated their contracts. Corus had entered into 10-year agreements with Dongkuk Steel, Duuferco, IMSA and Marcegaglia for offtake from Teesside in 2004. In April, the consortium unilaterally terminated the contract, making the plant’s operations unviable.
Last November, Corus was forced to reduce their blast furnace output by 30% as demand for steel plummeted. Since then, the agreements with the buyers had been under constant review. Corus has now begun discussions with nearly 2,000 plant employees to mitigate the impact of this termination.
Analyst say the consortium was buying plant output at cost, and this did not contribute much to its profitability. Also, in January, Corus had planned to sell the plant to these buyers, and use the proceeds to pay off debt of 450-500 million dollars. But with the plant on the verge of shutting down, analysts say there may be some write-offs on account of inventories, hurting Corus’ profitability further.