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Redcar Steel Works Under Threat

Tuesday, September 15, 2015

GMB Call On The UK Government To Help Save Redcar Steelwork In Precarious Position

The high pound, weak euro, high energy prices and very difficult market conditions have led this plant into jeopardy says GMB.

GMB, the union for steel workers, commented on press report on 15th September on the position at the SSI Redcar steel works. See notes to editors for copy of report in Daily Telegraph dated 15th September 2015 that 2,000 jobs are at risk as Redcar steel plant fights for survival.

Dave Hulse, GMB National Officer, said “This SSI plant is in a very precarious position as managers are awaiting a main board decision on its future.

Over the past six months the unions have been trying to get support from the UK Government to help this plant deal with a difficult position. The high pound, weak euro, high energy prices and very difficult market conditions have led this plant into jeopardy. These factors threaten the future of the UK steel industry.

This is a very difficult time for thousands of Teesside workers and their families. GMB will do all we can to save these jobs and keep steel making on Teesside.”

End

Contact: Dave Hulse 07971 266 156 or Michael Blench on Teesside on 07870 176 748 or GMB press office 07974 251 823 or 07921 289880

Notes to editors

Copy of report in Daily Telegraph dated 15th September 2015

2,000 jobs at risk as Redcar steel plant fights for survival

The Thai owners of the historic Redcar plant on Teesside failed to pay back several loans totalling around £80m to lenders in June

By Ben Marlow

One of the UK’s biggest steel plants is locked in a desperate bid for survival following a series of missed debt repayments to its banks.

The Thai owners of the historic Redcar plant on Teesside failed to pay back several loans totalling around £80m to lenders in June and were given a short-term stay of execution until the end of September to find the money.

Failure to stump up the cash could result in the 160-year-old site, which employs more than 2,000 workers and 1,000 contractors in a region where unemployment is among the highest in the country, being put into administration after a long battle with huge losses. It is understood PwC is on stand-by to handle any insolvency.

Redcar owns the second-largest blast furnace in Europe, which at full capacity is capable of turning out up to 400 slabs of steel a day and 3.5m tons a year.

A total of four loans were scheduled to be settled at the end of June but Sahaviriya Steel Industries, which rescued Redcar in 2011, failed to meet any of them. The majority of SSI’s 11 banks agreed to extend the repayment for three months and SSI then immediately entered into a fresh set of negotiations to try to get another stay of execution until the end of the year.

The company’s perilous financial situation was laid bare in its most recent quarterly financial statement, which covered the period to the end of June and was filed with the Thai stock exchange on August 15. As of that date, the company had only managed to obtain a letter of intent from its lenders, rather than any firm agreement for a second extension.

Debt negotiations of this nature are always complicated but the number of lenders SSI has – and the failure to get all of them to agree to the first extension – is likely to make discussions particularly difficult.

The stock exchange document also reveals SSI had to borrow around £30m in the form of an interest-free loan from an unnamed company director.

Redcar has struggled consistently with big losses since being mothballed by previous owners Tata Steel in 2010. A year later, faced with imminent closure, SSI rescued the operations in a £290m deal and relit the furnace in April 2012. However, the plant has been reliant on continued financial backing from its parent and the support of a handful of senior banks ever since.

It racked up losses of £194m in 2013, had bank loans totalling $792m and the Thai owners pumped in $121m, the latest in a series of cash injections. It is thought SSI has ploughed as much as £1bn into the company.

This year, the firm’s prospects have deteriorated even further amid falling steel prices and cheap imports from China. The price paid for slab steel has plummeted from $500 (£318) a tonne to under $300 (£191) in the past year and Redcar posted losses again in the last six and three-month trading periods.

Chief operating officer Cornelius Louwrens has warned on several occasions recently that Redcar’s future is in doubt. In August, he said: “You cannot make this size of losses continuously, without, at some point, saying: 'This cannot work any longer’. What I cannot say is how long we have for the market to turn around. But my message to everyone is to focus on their jobs, do them as good as possible, because this is what we can control.”

He then complained about high business rates and energy costs, and urged the Government to do more to help the plant. “We welcome the fact the Government has said it supports manufacturing but we would like to see some action to support these words.”

A spokesman at the Department for Business said: “We understand this must be a worrying time for all involved and we remain in regular dialogue with the company to understand its plans.

“The steel industry is facing difficult global economic conditions but government is working closely with the sector to provide help where we can. We have provided steelmakers with millions of pounds in compensation for energy costs and recently voted to extend anti-dumping measures on certain Chinese steel products.

“We will continue to talk to companies like SSI and provide support where we can.”

SSI and PwC both declined to comment.

 

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