DUBAI/LONDON Liberty House, the commodities and industrials group which has been buying up assets in the British steel sector, plans to ramp up its UK steel output to 5 million tonnes in five years, its executive chairman told Reuters.
Helped by rising steel prices and a falling pound making exports more competitive, Britain's steel sector is slowly emerging from a crisis that saw some 5,000 jobs axed since last October and various steel assets put up for sale.
One of these was Tata Steel's specialty steel business, based in Rotherham in northern England.
Privately owned Liberty made a formal approach for the asset last month and its chairman, Sanjeev Gupta, said due diligence on the 100 million pound deal ($127 million) should be concluded by end-February.
Gupta's model for producing steel profitably and sustainably in Britain is to use local supplies of scrap and renewable energy to make the alloy, instead of importing expensive steelmaking raw materials such as iron ore and coking coal.
He has also moved downstream by buying up engineering firms that will consume the steel his plants produce, and turn it into higher value added, more lucrative end-products.
Tata's specialty steel plant in Rotherham is currently operating at 20-25 percent capacity, Gupta said, producing about 250,000 tonnes annually. The plant can produce up to 1.3 million tonnes, he said.
Liberty House is also aiming to ramp up output at its facility in Newport, Wales.
"Rotherham capacity should reach over one million next year and Newport to two million over the next three and a half years. The balance will have to come from new capacity," he said.
The company is weighing up options to build new furnaces in Scotland and the Midlands to cover the balance of their five million tonne target.
"There is a clear opportunity. There is not much recycling in the UK unlike other places in the world," Gupta said. "So there is a gap which has developed in the market."
($1 = 0.7901 pounds)
(Reporting by Hadeel Al Sayegh in Dubai and Maytaal Angel in London, editing by David Evans)