My Corus vow to you all

Feb 12 2009 by Sue Scott, Evening Gazette

THE HEAD of the Italian owned family steel firm that is to take a 56% stake in the Corus Cast Products plant at Redcar made a long-term pledge to Teesside yesterday.

Antonio Marcegaglia, chief executive of the euros 4.2bn firm, which has become one of the biggest steel consumers in Europe, said: "We are coming for the long term. We want to grow this plant and make it stronger and more productive.

"We are fully aware that it requires a long-term view; we are a long-term player in the industry. We know significant investment is required in the blast furnace and we are prepared to invest the amount of money required."

Mr Marcegaglia revealed that his company - one of the original consortium members who signed an offtake agreement with Corus in 2004, effectively guaranteeing the future of the plant for 10 years, - had first considered bidding for TCP 12 months ago. But the worsening economic crisis, which saw Corus parent Tata Steel shedding thousand of jobs across Europe and the UK "accelerated" the decision. Around 1,800 people work at the TCP plant, which reduced output from its blast furnace by 30% in December as steel inventories backed up alarmingly.

The move successfully safeguarded jobs at TCP, which was one of the few Corus plants untouched by job losses, but it confirmed yesterday that the slow down would continue beyond March.

Marcegaglia’s investment, thought to be of the order of several hundred million pounds, is cash-financed from the Italian firm’s considerable resources. Over the past 10 years, the company has grown turnover by 14% and has continued to expand in a distressed market. In the past year, it announced multi-million euro investment in Romania and in its first plant in China. Its turnover outside its homeland is set to grow by 30% by 2012.

Mr Marcegaglia said his company had set aside 1bn euros to fund growth "both in Italy and globally" and was looking at "further synergies" between Marcegaglia and the Corus group "although we do not have anything specific in mind at this time".

Founded by Antonio Marcegaglia’s father Steno as a craftsman workshop in 1959, the still family-owned group has become one of the world’s leading players in the steel transformation industry, with interests in stainless steel and the entire flat product chain, supplying into other divisions of the Marcegaglia empire, which includes building, home products, engineering, energy, services and even tourism.

Since 2004 it has almost doubled turnover to 4.2bn euros and boosted volume in its steel processing divisions by 25% to 5m tonnes last year. Its total demand for steel is forecast to reach 8m tonnes by 2013.

Mr Marcegaglia said there was "sound rationale" behind the move to acquire TCP.

"We remain bullish on the long term perspective of the global steel industry. The downturn will last hopefully only a few quarters... I think we will see an improvement in the third quarter. It doesn’t mean it will go back to growth but there will be a relief."

An increase in output the following year would be driven by demand from the BRIC nations - Brazil, Russia, India and China - which together are responsible for 52% of the world’s steel consumption, and further consolidation among suppliers, he said.

"I still believe the balance will be in favour of the procurer."

TCP will be the first steel mill to be owned by the company. Quipping that it was a "great gift to my father" in the firm’s 50th anniversary year, Antonio Marcegaglia said vertical integration was key to company’s expansion, although he was wary of committing 100% of raw material requirements from Marcegaglia owned assets.

The deal to aquire TCP, which should be finalised by June, would put Marcigaglia in control of the supply of around 30% of its high-end product requirements.

"I will not be comfortable with 100% independence or 100% integrated. Two thirds (of Marcegaglia’s requirement) is up, as it is now, for open buying."

The offtake agreements struck with other TCP consortium members will now, in effect, be torn up. Instead, new steel supply contracts will be forged with Duferco, Imsa and remaining divisions of the Corus group, which continues to hold a minority share in TCP, as does Dongkuk, which will become the second largest stakeholder in the new controlling company.

Mr Marcegaglia said the agreements had "complicated" negotiations with TCP but the Memorandum of Understanding signed between the two parties was a "serious statement of intent" while talks continue over the transfer of assets. They would not, though, include the neighbhouring Redcar beam mill.

Mr Marcegaglia said it was ironic, given the recent row over foreign owned companies parachuting in their own nationals to work in Britain, that an Italian firm should be securing the future of 1800 British jobs.

He said as a family owned firm, albeit with a 6,500 workforce worldwide, Marcegaglia "appreciated and respected" the contribution of individuals to the prosperity of a business. He said it felt a "social responsibility" towards the people of Teesside.

The steel community around Redcar will look forward to that commitment being demonstrated in June - at about the time the deal is expected to complete - when he has an invitation to take part in the town’s biggest fund-raiser... as a member of TCP chief Jon Bolton’s It’s A Knockout team.