By Maytaal Angel
LONDON (Reuters) - British steelmaker Caparo Industries is set to file for administration, according to an industry source familiar with the situation who said this could put up to 1,700 jobs at risk in a "worst-case scenario".
Such a development would intensify a crisis in the British steel sector. Tata Steel (NS:TISC) is set to announce about 1,200 job cuts, according to union sources, weeks after SSI went into liquidation citing plunging steel prices and cheap Chinese imports.
"This (Caparo) is not like SSI, there's parts of the company not affected by steel prices, they are viable parts of the business, they could get sold," said the source.
A Caparo spokesman was not immediately available to comment.
The news of more potential job losses comes as Chinese President Xi Jinping begins a four-day UK state visit. British Prime Minister David Cameron said he would raise the issue of subsidised Chinese steel during the visit.
China produces about half the world's steel and has been exporting record amounts of the alloy this year and last.
Producing steel profitably in Britain is difficult due to cheap imports, particularly from China, a strong currency, lacklustre demand, plus energy costs and "green" taxes on heavy industry that are some of the highest in the world.
Also, steel prices globally are at their lowest levels in over a decade thanks to over-capacity and tepid global economic growth.
Over 2,000 direct UK steel jobs were lost and thousands of jobs indirectly related to steelmaking are at risk following the failure of SSI. Tata Steel has meanwhile cut thousands of jobs since it bought Anglo-Dutch producer Corus in 2007.
"This is yet another hammer blow for steel and manufacturing communities across the UK already reeling from the closure of Redcar (SSI) and job losses at Tata Steel," Britain's largest union Unite said about Caparo.
"Government ministers need to ask themselves. How many more steel firms need to go to the wall before they step in and support the UK's steel industry? Failure to act urgently could lead to a 'domino effect'."
The British steel sector currently employs fewer than 20,000 people directly, down from about 200,000 in the 1970s.