A PROPOSED merger in the steel industry has sparked renewed fears for threatened jobs at Corus on Teesside.

Shares in the Anglo Dutch company rose four per cent following the announcement of a proposed merger of three European steel firms. Analysts said this was because there were hopes Corus would be taken over, which would lead to a reduction of capacity in the industry.

The proposal will see French firm Usinor, Luxembourg's Arbed and Aceralia of Spain join forces to form the world's largest steel company. Industry insiders said the merger could incite further takeovers in the sector.

Tim Green, analyst at Brewin Dolphin Securities, said: "The need for further consolidation has become essential because of the collapse in steel prices."

Tony Poynter, chairman of the multi union steel committee at Teesside, said: "It is worrying that big European steel makers are getting together so they can pool their resources, particularly on the research side."

But Mick Mannion, vice chairman of the multi union steel committee, said his personal view was that the merger was a good move. "They are getting together to reduce their costs - they are not going to keep all of their steel-making facilities and the whole of the industry in Europe knows it has to restructure."

He added that he thought the merger was nothing steel workers at Redcar and Lackenby needed worry about and said they already had enough on their hands.

Ashok Kumar, MP for Middlesbrough South and East Cleveland, said he saw the merger as a challenge rather than a threat. He said: "We must remember we have one of the most efficient steel industries in the world."

He challenged Corus to say how committed they were to the steel industry in the UK and added: "If they are, then we have nothing to be frightened of by this merger, we mustn't be downhearted about it. I remain optimistic."