CORUS owner Tata Steel has won the first stage of a legal battle against the consortium that pulled out of a 10-year deal to buy steel from the Teesside Cast Product plant in Redcar which shut last year with the loss of 700 jobs.

Tata and the international consortium fell out in 2009 when the latter pulled out of the deal in the fourth year – wiping out almost 80% of TCP’s order book overnight.

The move threatened the future of the plant, which was mothballed last May after a spirited fight to rebuild the order book and cut costs. Around 700 of the 1,700 workers were laid off as a result.

Tata said it had won “a partial final award” in its battle with the consortium. “The arbitral tribunal, amongst other things, found that the off-takers did not validly terminate their off-take agreements,” the company said.

“The arbitration proceedings are being held under the auspices of the International Court of Arbitration (and) will now move to the next phase of determining the amount of damages.”

Tata estimates it lost as much as £150m due to the early termination of the agreement.

The company said falling demand in Europe had contributed to a 4.8% drop in third-quarter sales to 5.9 million tonnes.

Tata’s European operations produced 3.7 million tonnes of liquid steel and recorded deliveries of 3.5 million tonnes – nearly 8% lower than the corresponding period last year.

The company said the improvement in its financial performance during the first half of its financial year had not been maintained.

Higher raw material prices and reduced seasonal demand had “among other factors, adversely affected margins at Tata Steel’s European operations”.

The company’s recovery from a damaging recession – in which falling demand led to a steep drop in the price of steel – was not helped by a fire at its Ijmuiden plant in the Netherlands last month. The fire caused damage to equipment at the site, forcing Tata to delay deliveries of products, including cold-reduced coil and hot-dip galvanised coil.

Tata has written to clients declaring force majeure, a measure allowing firms to miss contracted deliveries due to circumstances beyond their control.

The company said the line was likely to remain idle for “months rather than weeks” but contingency plans were in place. There is no effect on the Teesside operation.

The company will use two other lines at the Ijmuiden site as well as others in Europe.

Bob Jones, group head of medial relations at Tata Steel, said: “We are absolutely determined to do everything we can to ensure disruption to customers is minimised during this period.”

His comments come as Tata prepares to sell its mothballed steel-making plant in Redcar to Thai firm SSI.

Although no deal has been done just yet, talks are at an advanced stage following the signing of a memorandum of understanding between the two companies last year.

Last month SSI said it had started to raise the £400m needed for the deal and expected to open the plant again by the summer.

The plant had been mothballed last year following a severe downturn in the global steel market.