After months of negotiations, Tata Steel-owned Corus has tentatively agreed to sell the beleaguered Teesside Cast Products plant to Thailand's Sahaviriya Steel Industries for a price of £320 million (Rs 2,325 crore).
However, according to both firms, the deal is far from complete. Corus MD and CEO Kirby Adams said, "This is the first of several steps required to reach a definitive sale agreement in the coming months, which, with the anticipated cooperation of the government, employee representatives and the northeast community, should result in the restart of steelmaking on Teesside in the first half of 2011."
TCP was partially mothballed in February this year, after a consortium of four buyers pulled out of a 10-year purchase contract with Corus, leading to a loss of nearly 1,500 jobs. The contract had helped Corus sell nearly 80 per cent of the plant's total output, which explains the need for mothballing when the deal was snapped. Between April and December 2009, TCP lost around £150 million due to the terminated contract. Corus said it would continue to pursue legal action against the consortium.
SSI proposes to continue to keep the 700 people in the plant and may hire a "few hundreds" more depending on market conditions. The plant's capacity is around 3.2 million tonnes annually and SSI hopes to increase it to 3.5 million tonnes in the future.
Until 2008, when the plant was running to full capacity, it fetched Corus an estimated $1.5 billion in revenues.
The assets covered by the sale MoU include the Redcar and South Bank coke ovens, TCP's power generation facilities and sinter plant, the Redcar blast furnace and the Lackenby steelmaking facilities, Corus said.
A sale agreement would also result in Corus and SSI operating Redcar wharf (TCP's bulk terminal) as a joint venture, giving Corus the flexibility to use Teesside to serve its other steelmaking operations, while also meeting SSI's requirements.
Win Viriyaprapaikit, President of SSI, said: "This transaction will enable SSI to fulfil its long-standing objective of becoming a fully integrated steel producer with both primary steelmaking and rolling facilities."
Corus and SSI will continue their negotiations, as well as hold talks with trade unions and the UK government in coming weeks and months to finalise the terms of a sale agreement.