Just after the world's largest steel maker, ArcelorMittal, said it was cutting production by a whopping 35 per cent due to a slowdown in the construction and automobile industries (See: Slowdown forces ArcelorMittal to cut output by up to 35 per cent ), Tata Steel's Corus Plc, Europe's second-largest steel company yesterday said that it would cut production by 30 per cent over the next six months and temporarily shut down three blast furnaces.
Earlier this month Corus had announced 400 job cuts to align its production with a demand slowdown in Europe, caused by the global economic downturn, in its distribution and building systems division in its units at Shotton, Wolverhampton, South Wales and Leeds. Corus employs 2,400 people at 36 sites in Britain and Ireland.
On 29 October Corus International, the supply chain management arm of Corus, announced it had opened a new sales office in Sofia, Bulgaria and invested in two new facilities in North Wales, which it had said were with the most automated and efficient production line in Europe. The new lines are capable of producing 1 million m2 per year of composite panel cladding for the construction sector.
The move to cut jobs follows previous measures by Corus to reduce expenditure on transport, consumables, energy and other costs.
The 30 per cent cut in production to the end of next March comes after it announced last month that it would reduce production 1 million tonnes or by 20 per cent between October and December by a million tonnes of crude steel. (See: Tata cuts steel output at Corus)
Corus has now decided to extend the production cuts beyond December. Corus expects to produce about 30 per cent less crude steel than planned during the two quarters to the end of March 2009.
The company also said it would temporarily shut two blast furnaces at its plants in Port Talbot and Scunthorpe in Britain and IJmuiden in the Netherlands and will also adjust output levels on its downstream production units to suit market conditions in their respective regions and end-use sectors.
In Britain, Corus has four blast furnaces at Scunthorpe, of which one has already been idle, while the two at Port Talbot and one at Teesside will not be affected by the production cuts for the moment.
''The current slowdown requires us to adapt our operations to the changing environment with maximum speed,'' Corus CEO Philippe Varin said in a statement. ''We are adopting proactive and responsible measures in the areas of production and costs to optimise our results. Meanwhile, our strategy for long-term growth remains unchanged.''
The statement said, ''The impact and continuation of the global economic downturn is having a major effect on steel customers in the automotive, construction, plant and machinery segments. Since September, the business has seen a significant decline in demand.''
The company had consulted with the employees and had started to focus on voluntary redundancy and said that it would put a range of support services to help the affected employees.
The production and job cut announcement made Moody's Investors Service revise its outlook on Tata Steel's Ba1 corporate family rating to negative. In the last wek of October S&P had downgraded its raintgs on Tata Steel UK from positive to stable over among reasons to "uncertainties over the parent's equity-raising plan of $1 billion, given the prevailing capital market conditions." (See: S&P revises Tata Steel UK's outlook to stable from positive)
At its Indian operations, Tata Steel, has said that it would not cut jobs and last week went ahead with a wage revision agreement, doubling the minimum wage payable to its employees at Jamshedpur.
Corus has annual revenues of about £12 billion, employing 42,000 people, produces 20 million tonnes of crude steel and was formed in 1999 by a merger of British Steel and Koninklijke Hoogovens which was bought by Tata Steel. It has three divisions - strip products, long products and distribution and building systems.
The impact of the economic turmoil, which has dragged many countries into recession, has also hit the steel industry with steel makers in Japan, China and Russia are cutting production as demand slows and inventories rise.
Major Indian steel producers including Jindal Steel Works, Essar Steel and Ispat Industries, have scaled down production following a steep fall in demand and a big jump in inventories. (See: Steel companies cut back production as demand slackens)
The World Steel Association said global production fell 3.2 per cent in September from a year earlier, to 108.4 million tonnes. Production in China, the biggest producer of steel, fell 9 per cent last month.
The price of steel, along with the price of other raw materials such as oil and metals, has been falling in the past three months on fears that a global slowdown will lead to lower demand. The prices for hot rolled coil, which was hovering at $1,200-1,250 a tonne, is now around $600-700.
Last week, ArcelorMittal, the world's largest steelmaker, also announced its plan to cut production by up to 35 per cent as the global economic slow-down hits demand for steel, mainly in the construction and automobile sectors. (See: Slowdown forces ArcelorMittal to cut output by up to 35 per cent)