A giant steel plant is set to be mothballed in the New Year, with the loss of 1,700 jobs.

Corus said its site at Redcar plant on Teesside will close next month, dealing a huge blow to the local economy.

Union leaders said the news was “devastating” and called on the Government to take immediate action to help save the jobs.

The future of the plant was put in doubt earlier this year when its main customer ended a purchasing agreement.

The Teesside Cast Products factory had a 10-year contract to supply slab steel to a consortium of four buyers.

The plant employs around 2,000 workers and is a major employer in the region.

Corus said it had made “strenuous efforts” over the past eight months to secure a long-term future for the factory after the “failure” of the four international slab buyers to fulfil their obligations under the contract, which was signed in 2004.

The contract committed the consortium to buying around 80% of the plant’s production.

Corus said in a statement: “Since the consortium broke this legally-binding agreement, from which it made an estimated 800 million US dollar profit, Corus has been diverting internal orders to Teesside Cast Products.

“The company has also been securing external orders on an ad hoc basis in a bid to keep the plant open while an alternative future for the plant was sought. This has cost the company about £130 million. Operating a three million tonnes per year merchant slab plant is not sustainable without a long-term strategic partner.”

Chief executive Kirby Adams said: “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.

“This is the last thing we wanted and we feel deeply about what is happening. Sadly, it has become unavoidable, through no fault of our people on Teesside.”

Corus said it will work with Government agencies to do everything it could to help the workers.

Corus said it will continue to have a substantial presence in the Teesside area, employing more than 2,000 workers in Hartlepool, Skinningrove, the Teesside Beam Mill and Teesside Technology Centre.

Keith Hazlewood, national officer of the GMB union, said: “This is devastating news for Teesside and shows how fragile the recovery from the recession is proving to be.

“The union will be seeking urgent talks with Corus and we will also want to talk to the Government about maintaining support for our vital manufacturing industries.

“What a terrible contrast between the 1,700 workers losing their jobs on Teesside and the multimillionaire bankers continuing to gorge themselves at the expense of the taxpayers.”

Terry Pye, national officer of Unite, said: “This is devastating news. We will do everything possible to fight the closure and we call on the Government to take immediate action to help the workers involved.”