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Termination of Contract Could Lead to Closure of Corus Teesside
05/11/2009 - Corus has initiated discussions regarding the possible closure of its Teesside Cast Products following the recent termination of a slab offtake agreement originally signed with four international slab buyers in 2004.
Corus has initiated consultations with employees and their representative regarding the possible closure of its Teesside Cast Products plant in northeast England.
The company said the move was triggered by the failure of four international slab buyers to fulfill their obligations under an Offtake Framework Agreement (OFA) signed with Corus in 2004. Under the agreement, the four members of the consortium were to buy just under 78% of the plant’s production for ten years.
The company said the move was triggered by the failure of four international slab buyers to fulfill their obligations under an Offtake Framework Agreement (OFA) signed with Corus in 2004. Under the agreement, the four members of the consortium were to buy just under 78% of the plant’s production for ten years.
The consortium partners—Marcegaglia SpA, Dongkuk Steel Mills Co Ltd, Duferco Participations Holding Ltd(1) and Alvory SA(2)—had agreed to buy their share of Teesside’s output at cash cost. However, the consortium unilaterally initiated moves last month to terminate the contract.
“I am extremely disappointed that the consortium members have seen fit to take this irresponsible action,” said Corus CEO Kirby Adams. “Their unilateral termination of a legally binding 10-year contract could bring to an end a fine heritage of steelmaking at Teesside.’
Corus said it is using all legal means to ensure that the terms of the 10-year offtake framework agreement are fully enforced and that the four consortium members live up to their contractual obligations.
In the meantime, the company has also begun discussions with employees and their representatives about what could be done to mitigate the impact of mothballing the plant on the facility’s 1920 employees and what future action may be needed. The company noted that any decision to mothball would likely lead to a significant number of redundancies.
“We regret the distress their action will cause TCP’s dedicated employees, who have worked steadfastly in the interests of the consortium,” added Adams.
NOTE: 1) Duferco’s share of the slab offtake is purchased through Steel Invest Trading SA; 2) Alvory SA is a wholly owned subsidiary of Ternium SA.
