Corus, the European subsidiary of Tata Steel today said that it will sell its mothballed Teesside Cast Products (TCP) unit in the UK to Sahaviriya Steel Industries (SSI), Thailand's largest steel producer, for about $500 million (£321 million).

The UK unit of Corus said it had signed a memorandum of understanding (MoU) with SSI for the sale of TCP unit in north-east England, which includes coke ovens, power generation facilities, sinter plant, blast furnace and steelmaking facilities.

The proposed sale, if successful, would create a significant number of new jobs at the plant in addition to TCP's existing workforce of over 700 and will provide a considerable boost to the local economy.

Nearly 1,700 people had lost their jobs when Corus, Europe's second biggest steelmaker announced in December 2009 that it would close the loss-making TCP unit after an international consortium failed to honour its long-term purchase contract. (See: Corus to shut plant in north-east England, cut 1,700 jobs) 

This month, Corus said that it would take back 200 workers from the TCP unit after unveiling plans to construct a new £31.5-million manufacturing plant to produce wind farm structures on the TCP site. (See: Corus to set up wind farm components plant at Teesside) 

After the international consortium backed out from the long-term purchase contract, Corus had been trying to secure external orders on an ad hoc basis in a bid to keep the plant running while an alternative future for the plant was sought.

This had cost the company about £130 million till September 2009 and the steelmaker said in December that operating a 3.5 million tonnes per year merchant slab plant was not sustainable without a long-term strategic partner.

The 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 in the UK, while also meeting SSI's requirements on Teesside.

"We are very pleased to announce this significant progress in our long-held objective to sell the TCP assets to a strategic industry investor.

This is the first of several steps required to reach a definitive sale agreement in the coming months which, with the anticipated co-operation of Government, employee representatives and the North East community, should result in the restart of steelmaking on Teesside in the first half of 2011," said Corus MD and CEO Kirby Adams.

"Having known SSI for the past ten years, I am confident that our collaborative efforts in the period ahead will provide a more sustainable business for the people of Teesside," he added.

SSI said in a statement that the main objective of the acquisition is consistent with its long term strategy of backward integration to upstream iron & steel making production, to enhance its existing business as well as provide a platform for future growth.

Currently, SSI is in the process of conducting due diligence and arranging financing for the proposed acquisition.

TCP occupies an area of approximately 800 acres and has a slab production capacity of 3.5 million metric ton per year.

"We have great respect for the tradition of steelmaking on Teesside and for the highly skilled Teesside workforce, having previously purchased slab from Teesside Cast Products.

For the past year we have held very constructive negotiations with Kirby Adams and the Tata Corus team and we look forward to engaging with all stakeholders in the same spirit of co-operation to secure a final agreement, said Win Viriyaprapaikit, president of SSI.