THE UK part of steelmaker Corus is expected to make an operating profit for the first time.

The Anglo-Dutch producer has had a turbulent time since the merger of British Steel and Hoogovens.

But sharp rises in the cost of steel and long-term deals on raw materials have put the company on a better footing.

Improved market conditions helped by restructuring plans have led to a far rosier picture in the near term than was predicted a year ago.

In an update ahead of its half-yearly figures, the group said it expected interim operating profits for the first six months to be more than £125m, compared with a £57m loss last time. The last time the UK steel operations were in profit was the financial year 1997-1998, which was before the merger in October 1999.

Jonathan Aylen, senior lecturer in economics at the University of Manchester Institute of Science and Technology, said: "It is a gift from the rising steel prices.

"Raw material costs have shot up, but they are in an advantageous position because a lot of these things are on long term contracts.

"They are getting the benefit now from being shrewd and cautious."

The world's steel companies have enjoyed happier times of late, with prices rising thanks to China's insatiable appetite for materials to fuel its economic growth.

A report by World Steel Dynamics (WSD), a US steel consultancy, has estimated steel companies will increase profits by up to 60 per cent this year. WSD said average profit per ton shipped this year will be $107, compared with $67 last year, and $58 in 2002.

Anthony Platts, assistant director at stockbroker Wise Speke, said Corus was well placed to benefit from improvements in the sector.

He said: "The voracious demand from China, leading to increased steel margins, has come at a fortunate time for Corus.

"With the effects of its restructuring yet to fully impact on trading, the turnaround to profitability at the operating level bodes well for the future."

Corus has carried out a restructuring plan, under the title Restoring Success, after reporting annual losses of £458m last year.

Michael Leahy, general secretary of ISTC - The Community Union, said: "The Corus trading statement is welcome news for employees and investors alike.

"The return to profitability in the UK is a tribute to the efforts of employees, which have at last been matched by similar commitment from management.

"Corus now needs to continue to invest in its UK operations and focus upon meeting the needs of its customers. If it does so, then British steelworkers, who are the most productive in the world, should have a bright future."