Overcapacity in the European packaging steel market has prompted the Tata group to take a tough call on Corus, which will see a reconfiguration involving more than 500 people.

By July this year, Corus plans to close the operations of Corus Packaging Plus' Bergen (Norway) unit, which has a capacity of 150,000 tonnes and employs 260 people.

Further, it might reduce the capacity of CPP's Trostre Works in South Wales by the year end, which could result in a reduction of 290 positions in operational and functional areas.

A Corus spokesperson said, CPP plans to reduce its capacity from 1.5 million tonnes to 1.2 million tonnes by the year end.

"Every reasonable effort will be made to minimise the impact on jobs and affected employees will be offered alternative employment in the UK with Corus Strip Products. A consultation process is underway," she said.

Currently, Trostre employs 761 persons.

The move comes a year after Tata Steel [Get Quote] completed the Corus acquisition and  aimed at moving towards a sustainable position for its packaging steels operation in South Wales.

In addition to the proposed reduction in capacity, CPP plans to seek a minimum of 30 per cent price increase for January to March 2009, reflecting the increase in raw material prices. CPP is also considering moving towards yearly contracts (April-March) to better align with raw material price negotiations.

Headquartered in Ijmuiden in the Netherlands, CPP supplies high-quality light gauge steels to the packaging industry worldwide. CPP is among the three major packaging steel makers in the Europe, the other two being ArcelorMittal and ThyssenKrupp's Rasselstein.

Europe's total tinplate capacity is 5.8 million tonnes while demand lags behind at 4.3 million tonnes. Moreover, with the latest increases in raw material prices, cost per tonne is likely to increase by more than euro100. Also, it's not just Corus, which is affected by overcapacity in the packaging steels sector.

According to reports, ArcelorMittal is planning to cut tinplate production in Canada and Belgium.

Sources said, overcapacity had made it difficult to push through price increases reflecting on operating results.

Corus, now a subsidiary of Tata Steel, the sixth largest steel producer in the world, is Europe's second largest steel producer.

• The Tata-Corus saga