India’s Tata Steel has been forced to scale back production and cut thousands of jobs in the UK and the Netherlands as the global demand for steel continues to plummet.

The Tata Group acquired UK steelmaker Corus in 2007 to become the world’s sixth largest steelmaker, in a market that had seen consistent growth since 2001.

Corus is to cut 1100 jobs in Wales and 1400 in England and Scotland from its 24,000-strong UK workforce. A further 1000 jobs will be cut across the rest of Europe, 800 of which will be at its large plant in Ijmuiden in the Netherlands. Together with 500 earlier job losses, Corus will have shaved off 9.5% of its 42,000-strong global workforce.

Corus chief executive Philippe Varin told the Financial Times that demand from Corus’ main European customers had halved in the past year, resulting in 30% less production compared to the same time last year. The company will continue the 30% production cut until the second quarter of this year.

The company’s situation tallies with the wider European steel production sector, where production has dropped by more than 40% since its peak in May as a knock-on effect from the decline of the automotive and construction industries. Mr Varin predicts that world demand for steel could drop by 10% this year, which represents the biggest year-on-year fall since 1945.

According to the UK’s Iron and Steel Statistics Bureau, the total exports from seven of the top 10 steel exporters, which have filed trade data to November, show combined exports down by 46% to 10.2 million tonnes in November, from the July 2008 peak of 19 million tonnes.

Added to flagging customer demand, according to statistics released by UK Steel, raw material costs for steel production almost doubled last year. Cost-cutting measures, including the job cuts, are expected to reduce Corus’s operating costs by more than £200m ($285m) a year.

The UK job losses will affect three sites: Rotherham and Stocksbridge in Yorkshire and Llanwern in South Wales. Mr Varin said that he would not rule out further job losses during the year if there were no signs of the business picking up.

Corus is also said to be considering scaling down its majority stake in its Teesside steelworks in the UK, which is owned by a consortium of four steelmakers, to a minority stake.