Irish Ispat has lost a total of £10 million (€12.7 million) over the past five years. Losses at the former Irish Steel are now running at an unsustainable level of £750,000 a month, according to its parent Ispat International, which yesterday decided to shut the plant down.

Mr Malay Mukherjee, the chief operating officer of Ispat International, gave a combination of reasons as to why the Irish operation was no longer viable. They included new environmental regulations, labour costs, energy prices and EU steel quotas.

The average wage bill at the plant had risen by 40 per cent since Ispat bought it in 1996, while electricity prices were 30 per cent ahead of Germany where Ispat also had an operation, he said. Tough new pollution controls that the Environmental Protection Agency wants to impose on the plant would have required an expensive refurbishment of the steel mill which has yet to turn a profit for its owners after five years. The economics of the plant had been further undermined by EU restrictions on the type and amount of steel it could produce that were only lifted last year, said Mr Mukherkjee.

Irish Steel has debts of £38 million, of which £9 million is owed to a syndicate of banks led by HSBC. The current assets of the Irish operation are £32 million and the plant is valued at £17 million. The bank debt is secured against £18 million which is due to the Irish operation from its customers.

Mr Mukherjee said that, if the company is wound up following the creditors' meeting called yesterday, the company should be able to pay its creditors.

The 400 staff at the plant would only be entitled to statutory redundancy in the event of a winding up, but a company spokesman said that a £9 million surplus in the Ispat Ireland pension fund could be distributed to the staff.

Ispat had invested £17 million in upgrading the plant on top of the £10 million in operating losses that it had incurred, said Mr Mukherjee. He said that the group had met the commitment it gave to the Government in 1996 to invest £20 million over six years. It has also maintained employment well above the level of 300 which the company had committed to.

The creditors' meeting will be held on June 28th, according to Ispat International.