LONDON (Reuters) - Britain's second-largest steelmaker SSI UK said on Monday it would mothball its Redcar iron and steelmaking plant in northeast England, and axe about 1,700 jobs.
The loss-making company, a unit of Thailand's largest steelmaker Sahaviriya Steel Industries (SSI), has been hit by a severe slump in steel prices this year. It has also missed several debt repayments.
On Monday it said it would continue to work with stakeholders, including the government, with a view to restarting operations in the future. It will therefore keep its Redcar coke ovens and power stations running.
"This is an extremely sad day for all of us at SSI UK, and in particular our employees and their families," said Cornelius Louwrens, SSI UK's chief operating officer.
"Market conditions this year have been extremely challenging and unfortunately this has led to the decision we are announcing today," he said.
The Redcar plant is located in Middlesbrough - an economically deprived region of Britain, where locals fear permanent closure could put at risk thousands more jobs indirectly related to steelmaking.
"Our fight to save our steel will continue," said Roy Rickhuss, general secretary of trades' union Community.
"The blast furnace must be mothballed properly to give it the chance of a future. We have serious concerns about the ability of SSI to do this and so the government must step in," he said.
British unions say that if SSI UK fails it could cost taxpayers hundreds of millions of pounds in redundancy and clean-up costs.
"The Prime Minister said his government would do ‘everything we can’ to support the UK steel industry. He needs to deliver on that. Now is the time to demonstrate political will," said Rickhuss.
The government said recently that Britain's steel industry is in crisis and promised to talk to China about concerns Chinese companies are flooding the UK market with cheap steel..
SSI UK said it made the difficult decision to mothball operations because it does not expect steel prices will recover in the short term.
Its Thai parent company, SSI, is working with creditors to consider options to restructure debt worth more than 50 billion baht ($1.40 billion), including selling the UK plant, which employs 2,000 people directly as well as 1,000 contractors.
Producing steel profitably is difficult in Britain due to cheap imports and a strong currency, plus relatively high energy costs and "green" taxes imposed on heavy industry that are some of the highest in the world.
The sector currently employs about 20,000 people directly, down from 200,000 in the 1970s.
Britain's biggest steelmaker, Tata Steel, said in July it could cut more than 700 jobs as it had been hit by cheap imports and high energy costs. The company has cut thousands of jobs since it bought Anglo-Dutch producer Corus in 2007.
Reporting by Maytaal Angel, editing by Louise Heavens and Susan Fenton