4 Min Read
* Steel mkt is tough, SSI UK's future is not yet secure
* Osborne budget would not help growing industrial firm
* Says has paid Redcar, Cleveland council £19 mln debt
By Maytaal Angel
LONDON, April 7 (Reuters) - Britain's second largest steelmaker SSI UK said it expects to record its first ever profit this year and to add much needed jobs in England's north east, but added market conditions were tough and that its future was not yet secure.
The steelmaker, a unit of Thai steel firm Sahaviriya Steel Industries (SSI), recorded a net loss of 7,259 million Thai baht ($223 million) last year, less than the 14,194 million baht loss recorded in 2012 but still enough to be a major drag on its parent company.
SSI UK, set up in 2011, employs some 1,800 staff directly and is indirectly responsible for thousands of jobs in Middlesbrough, one of the most economically deprived regions of the country.
"This year we'll produce 3.2-3.3 million tonnes of slab, and with current raw material costs and slab prices we should be able to enter into profits by the second quarter," said SSI UK's business director and chief operating officer Cornelius Louwrens.
He added: "Just like any other business we need to be profitable otherwise if we keep on making big losses the inevitable will happen, but at this stage we don't see that risk."
The main business unit of Thailand's SSI recorded a net profit of 210 million bhat last year, but the consolidated group posted a net loss of 7,053 million baht, in large part thanks to SSI UK's 7,259 million baht loss.
Producing steel profitably in the UK has become increasingly difficult given shrinking demand plus higher production, labour, logistic and energy costs compared even with mainland Europe, which is itself struggling to compete with Asia and the United States.
Also, global steel prices are depressed ST-CRU-IDX and prospects are dim, given a massive surplus fed in large part by top producer China, where many state sponsored mills run for years on end, even when loss making.
In his recent budget, UK Chancellor George Osborne offered to help UK manufacturing by extending a compensation scheme that offsets some of the industry's carbon costs out to 2020, and by freezing the country's carbon price floor.
UK industry pays some of the highest green taxes in Europe, and Lauwrens said the recent help offered by Osborne to industry was designed to help firms whose output was shrinking, not to aid a business like SSI UK that wants to grow.
"Our focus is on ramping up. We believe we can get close to 4 million tonnes a year from the existing plant, then we'll look at further ways to increase our output. Job cuts are not likely, in fact where it makes sense we're taking on people," said Louwrens
But he commended government, both national and local, for taking some measures to support industry, noting that thanks in part to this support, SSI UK last month finally repaid Redcar and Cleveland councils some £19 million pounds worth of debt.
SSI bought the former Corus plant in Teesside, Middlesbrough for about $500 million in early 2011 from Tata Steel , bringing cheer to locals as it revived the region's 160 years of steel and iron making history.
But a variety of delays meant the mothballed furnace was only relit in April 2012, causing huge losses. SSI ships most of its semi-finished steel to Thailand where it is re-rolled and sold to automotive and other markets in Asia.
$1 = 32.5300 Thai Baht Editing by Keiron Henderson