The Redcar steel plant employing 2,000 workers and 1,000 contractors could be put into administration after it missed a series of debt repayments.
The SSI-owned Redcar plant, one of the largest in the UK, has been struggling with falling demand for its products for years. The price of the slab steel it produces has fallen by 40 per cent over the past year because of cheap imports from China, forcing the SSI chief operating officer Cornelius Louwrens to admit this summer that the plant’s ‘significant and substantial’ losses could not be sustained.
According to The Telegraph, the company has failed to repay loans worth £80m in June and was given a short-term stay of execution by lenders.
"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," the newspaper said.
According to Michael Blench, regional officer of the GMB union, SSI is awaiting a decision from its board whether to keep the plant going or mothball it.
SSI took over the Teesside plant in 2010 after it was mothballed, and is believed to have spent around £1bn getting it up and running.
Redcar is not the first UK steel plant to have reported problems in the recent months. Tata Steel announced a series of job cuts earlier this year as the industry as a whole faces what has been described as the most difficult times.
The unions have called on the government to put measures in place to protect the collapsing sector.
"While we appreciate the incredibly difficult market conditions faced by all UK steel producers, we believe that a lack of support from the UK government in vital areas such as energy, environmental and business taxes and procurement threaten the very future of the UK steel industry," said a spokesman for steelworkers' union Community.
Industry minister Anna Soubry told the Commons today the government was examining options to provide help. "We're looking at all the things that Government can do to continue to assist the steel industry and we've already started that work, which is one of the reasons why, for example, I'm going to China next week specifically to talk to the Chinese about their over-production and the allegations of dumping," she said.
She avoided answering whether the government is considering helping the manufacturers with their enormous energy costs. "It's hugely complicated, we already have a compensation scheme, we are looking at how we can expand that, but we have to make it absolutely clear that if we begin to take the pressure off electricity-intensive industries we've got to shift that somewhere else,” Soubry said. "So it's not as simple as perhaps it seems."