STEEL bosses have cheered signs of recovery in the industry, but warned that demand is well below healthy levels.

India-based Tata Steel, which employs about 1,500 North-East workers, said a cost cutting drive had helped to boost its prospects in Europe.

The firm announced earlier this year that 400 staff at its works in Port Talbot, South Wales would be going, which followed about 40 job cuts made at its Teesside operations last year.

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Industry analysts last year predicted that overcapacity and low prices in the steel industry could see plants closed across Europe.

Yesterday's trading update offered positive signs, as Tata's first quarter turnover rose 12.5 per cent to £2bn in its European operations compared to the same time last year.

Dr Karl-Ulrich Köhler, head of Tata Steel in Europe, said: “European steel demand is moving in the right direction.

“Though demand remains well below levels we would regard as healthy, we can see greater stability emerging in the markets we serve," he said.

“Our quarterly financial performance improved slightly, despite market spreads tightening compared to the previous year.

“This would not have happened without the work we are doing to reduce costs and improve our products and services.

“But Europe’s position as the world’s most open market is bringing in a rising tide of imports.

“While we fully support free trade, all trade must be fair and international rules fully respected and enforced.

“Our focus on operational reliability and costs will continue as we pursue further progress towards sustainable financial performance.”

"Though demand remains well below levels we would regard as healthy, we can see greater stability emerging in the markets we serve," he added.

Tata's only steel-making plant - at Redcar - was sold to Thai firm SSI in 2011. It continues to operate the Redcar beam mill, which rolls and finishes construction steel sections, and Hartlepool pipe mill, which supplies pipes for energy projects. The company also has a plant in Skinningrove, east Cleveland, where it provides steel for track shoes on earthmoving vehicles, and runs a research and development centre near Redcar.

Earlier this week, Tata announced its North-East plants had secured £10m of gas pipe contracts.