* Major customers pull out of 10-year deal
* May suspend operations at plant, leading to job losses
* Stake sale in plant may be affected
* Tata Steel stock closes down 4 pct, underperforming bourse
(Adds CEO quotes from conference call)
By Prashant Mehra
MUMBAI, May 8 (Reuters) - India's Tata Steel Ltd said its Corus unit may have to indefinitely suspend operations at its Teesside Cast Products plant in England, a move that could lead to large job losses, after a contract was cancelled.
The company, the world's sixth-largest steelmaker, said it had to consider mothballing operations after a consortium that had a 10-year offtake agreement for 78 percent of the plant's output decided last month to unilaterally terminate the contract.
Any shutdown at the plant -- which makes steel slabs, from which steel sheets are rolled, for use in the auto and engineering sectors -- could lead to very significant redundancies among the plant's 1,920 employees, it said.
"There is no valid reason for the termination, so we will be pursuing all legal options for compensation... in any form," Corus Chief Executive Kirby Adams said in a conference call, adding global slab prices had fallen below costs at Teesside.
The consortium of Italian steelmaker Marcegaglia, South Korea's Dongkuk Steel, Alvory SA and Duferco Participations Holding Ltd signed the agreement in 2004.
British Business Secretary Peter Mandelson said the government would support Corus in challenging the termination.
"We cannot see these jobs on Teesside going just as a result of certain companies pulling out unilaterally from contracts they should uphold," Mandelson told Sky News.
Corus, Europe's second-largest steelmaker, announced several restructuring measures earlier this year, including 3,500 job cuts worldwide, and hived off non-core assets as it battles the severe downturn in the steel industry.
Last week, the World Steel Association forecast steel demand would tumble 15 percent in 2009, its steepest since World War II.
"The steel market is very difficult at the moment and the possibility of doing something in the short-term is extremely limited," Adams said.
STAKE SALE UNCLEAR
In January, Marcegaglia and Dongkuk agreed to buy an 80 percent stake in the Teesside unit, valuing it at an estimated $600 million, but that agreement could now be off.
"We have not been advised on whether the memorandum of understanding is finished, but I would find it odd if Marcegaglia and Dongkuk will buy stake in a plant at which they have cancelled an offtake," Adams said.
The MOU for the stake sale expires in June.
"There are any number of possibilities, but we are in a very different environment from what it was a year ago," Adams said when asked if Corus would consider selling the Teesside plant.
"It's too early for any answers."
Shares in Tata Steel slipped on the news and closed down 4 percent at 282.50 rupees on Friday, in a Mumbai market that fell 2 percent. (Additional reporting by Humeyra Pamuk and Frank Prenesti in LONDON; Editing by John Mair and Simon Jessop)