Corus reborn

Britain's biggest steelmaker is returning to health

A YEAR ago, its shares dipped briefly below 4p on the London stockmarket. At their peak this March, they were above 45p. In 2000 the company lost £2.8m a day; last year, one-quarter as much; this year, brokers foresee a modest profit, after price rises of 5-8% in January, 10% on April 1st, and probably more to come. In place of repeated cuts, it plans to raise output by 2m tonnes to 13.8m by 2006. That is the miracle of Corus, successor to British Steel, privatised in 1988 and Anglo-Dutch since a merger with Hoogovens in 1999.

Not all the news is good. While two big plants at Port Talbot and Scunthorpe will be increasing production, a slightly smaller plant on Teesside will have to find markets abroad for its 3.4m tonnes or risk closure. The high-grade steels now made at two plants near Sheffield will be concentrated at one. And all the figures look puny beside those of 25 years ago, when British Steel made over 20m tonnes, had 150,000 employees - and would have gone under had not Margaret Thatcher sent a tough American to sort it and them out. But, when the big steel expansion seems to be happening in China, any growth in Britain is a surprise. The queues recently stretching from Port Talbot's Jobcentre for new steel jobs there were the first in decades.

Corus is not the only one with ideas. South Wales has lost 5,000 steel jobs since 2000. But now, as Port Talbot celebrates, a Spanish firm is working on plans for a big new plant at the Cardiff works that it saved from closure 15 months ago, and a Swiss-Iranian one is investing at Newport.

Why have things improved? Mainly because the world economy and demand for steel have. Even as China's own output soars, so do its imports. The United States in December ended the protective tariffs introduced in early 2002. At home, Britain's car industry is flourishing. So steel prices overall are increasing, and only part of the rise is being eaten up by higher input costs - iron ore, coal, shipping - caused by booming Chinese demand.

Corus's own private troubles have shrunk too. Its merger with Hoogovens brought it aluminium plants on the continent. These are modestly profitable, but it would love to sell them. It tried to in late 2002, but Dutch trade-union hostility blocked the deal. In the resulting unease, Corus got itself a restructuring plan and a new chief executive - Philippe Varin, formerly of Pechiney, the French company that had wanted the aluminium plants - to push it ahead. That may cost £250m, but last December, just as the American tariffs ended, Corus was able to raise £291m in a share issue. The share price soon rose sharply, as a Russian tycoon, Alisher Usmanov, pushed up his stake to 11%, amid talk that he might try to form a joint-venture with Corus in its Teesside plant.

At a humbler level, one of Corus's two blast furnaces at Port Talbot, hit by an explosion in 2001, was back at work early last year. And performance is improving at its big (6.4m tonnes) Dutch plant. But mere tonnage of crude steel is not Corus's measure of success. Its processing of the stuff has long since moved downstream: on many industrial estates, you'll see sheds whose steel cladding was rolled, galvanised and colour-coated for the developers by Corus. And of course it is moving upmarket. It does not produce reinforcing rods for builders' concrete, but makes steel frames for houses, hoping to see Britain go for the modular housing familiar in mainland Europe. It has just announced a process for injection-moulding of polymer-coated steel items in a single step. That may not sell much steel - computer casing or mobile-phone covers don't need much - but the know-how is valuable.

None of this guarantees a bright future. When China's economy slows down, its steel mills will look harder than ever for export markets. World recovery is still fragile, and steel, like other commodities, sees roller-coaster prices. But at least the firm is back from the all-but dead.

Britain's biggest steelmaker, Corus, is returning to health.

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