• Thai steelmaker starts raising funds to buy Corus plant
• Up to 1,000 could be re-employed on Teesside

A plan to unwrap the mothballed Corus steel plant on Teesside and re-employ up to 1,000 workers came a step closer tonight after Thailand’s main steel producer said it had started to raise part of the £400m it needs to buy the business.

Sahaviriya Steel Industries (SSI) told investors it would raise about 6 billion baht (£127m) in a rights issue and private placement to help finance its purchase of the Redcar plant.

The Thai company agreed in August to buy the plant from steelmaker Corus, owned by India’s Tata Steel, to boost its position in the global steel market.

Unions representing former workers at the plant were expected to welcome the plans after talks with the proposed new management revealed a need to re-employ between 800 and 1,000 of the plant’s 2,000 former staff.

Corus, Europe’s second-largest steelmaker, had mothballed the plant in February after failing to find a long-term partner for its output. A preliminary agreement in 2009 with two members of the four-strong consortium that bought the plant’s output, Italian steelmaker Marcegaglia and South Korea’s Dongkuk, collapsed after months of wrangling.

The two firms had agreed to buy an 80% stake in the unit, valuing it at an estimated £480m. Under the memorandum of understanding, they were due to take a majority holding in the operation, which produces steel slab, leaving Corus with a minority stake.

At the time of the deal, Corus cut 2,500 jobs in the UK at Llanwern and Port Talbot in south Wales as well as at Rotherham and Stocksbridge in Yorkshire. No mention was made of the 2,000 workers at Teesside because of the planned sale.

The closure was described as “devastating” by union leaders and local councils for the effect it would have on local employers and shops once the jobs were lost.

Since the summer, talks with SSI have progressed, with several constructive meetings between union officials and SSI management.

The Thai company said it expected to complete the financing by February and open the plant again by the summer. SSI’s president, Win Viriyaprapaikit, said: “After the fundraising, the acquisition should be completed in the first quarter of 2011.”

SSI has said the deal would enable it to fulfil its longstanding objective of becoming a fully integrated steel producer with both primary steelmaking and rolling facilities. It expected the acquisition to help boost its production and sales to 3m tonnes in 2012, reducing production costs and increasing its competitiveness.

“After the completion of the purchase, we expect the plant to be able to produce slab for SSI within six months. We are confident that sales and production should increase to 3m tonnes in 2012,” Win said.

However, SSI investors gave the announcement a lukewarm reception.

To operate the plant, SSI is looking for loans worth about $ 650m (£420m), including $ 200m for working capital, Win said. “All the funding will boost our debt-to-equity ratio to 2.0 from 1.0 now,” he added.

Worries about the rise in debt pushed shares in SSI, valued at $ 634m on the bourse, down to the lowest in a month at 1.43 baht, 2% lower than Friday.

Business: Manufacturing sector | guardian.co.uk