Europe's second largest steelmaker, Corus, will be effectively 'mothballed' in the New Year with the loss of 1,700 jobs.

It had been announced in May that the 150-year-old steel plant based at a site in Redcar could close - dealing a huge blow to the local economy.

Corus Chief Executive Kirby Adams claimed the company had no option but to "mothball" the Teesside Cast Products factory after an international consortium broke a binding contract.

Operations at Redcar, Lackenby and South Bank will be closed by the end of January but the figures do show 600 fewer job losses than originally expected.

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The steel giant is however one of the biggest employers on Teesside and unions said the closure would have a painful impact on the area.

The Business Secretary, Lord Mandelson, said it was "very disappointing" that Corus had not been able to find a new buyer but has promised help for workers finding new jobs in an area which has been blighted by high unemployment.

With a loss of £130m between April and September Mr Adams said the Redcar plant was "unsustainable" without new customers.

Mr Adams, who broke the news to workers at a meeting at the site this morning, added: "We are acutely aware that this will be devastating news for our employees, our contractors, their families and the local community.

"We extend our sincere gratitude to all of them, as well as to the management team and the trade unions on Teesside, who have all worked night and day to try and avoid this outcome."

Corus, which is owned by the Indian conglomerate Tata, intends to keep open a number of operations, including the Redcar Wharf, Redcar coke ovens and some of the power generating capacity.

(LB/GK)