The Port Talbot plant is a major employer in the area

The warning comes as the Anglo-Dutch steel firm Corus announced "significant further capacity reductions" to stem losses of almost �400m.

The company would not be drawn on which plants it might be thinking of closing, with some analysts saying that Teesside and Scunthorpe were most vulnerable.

However, Port Talbot, which employs 3,000 people directly with around 5,500 contractors in addition, is also one of Corus' top UK plants and the announcement has inevitably prompted fears for its future.

If Port Talbot were to close, experts estimate that for every job which could go at the site, an equal number of jobs would be lost in the wider economy of south and west Wales.

Corus jobs in Wales 8,000 in total Port Talbot - 3,000 Llanwern, Newport - 1,500 Trostre, Llanelli - 1,000 Shotton, Flintshire - 800

This would follow on from 3,000 job cuts Corus made at its plants in Wales in 2001.

However, Corus invested �75m in a new blast furnace at Port Talbot after an explosion in November 2001 which killed three workers.

The new furnace was opened in January 2003, a development which was seen as a sign of the firm's commitment to steel-making at the site.

Noel Crowley, leader of Neath Port Talbot council, said if Port Talbot were to close now, it would take 20 to 30 years for the local economy to recover.

"It would be a disaster for my county - every shop, every restaurant, every business would be affected because they are all touched by the steel works," he added.

The new blast furnace was seen as an investment in the site's future

Howell Evans, vice-president of West Wales Chamber of Commerce, said the possible shutdown of the plant would have a devastating effect on the west Wales economy as a whole.

"We don't have the cushion which the better blessed situation of south east Wales has.

"We are dependent on a few major industries to keep us going - it's not just the people in Corus but all the services provided by local businesses."

Manufacturing

Calvin Jones of the Welsh Economy Research Unit at Cardiff Business School said a study of the cutbacks at Corus' Llanwern plant in 2001 had shown job losses in such situations resulted in twice the number of job losses in the wider economy.

"What proportion of the extra losses is centred on Neath Port Talbot depends on the supply chain for the plant, but the area will not do as well as Newport because it is further down the M4."

Mr Jones suggested manufacturing in Wales should brace itself for continuing bad news in the long term as the UK and Europe struggle to compete with the lower cost base of developing nations such as China and Korea.

"Although this is part of a short-term crisis and is always a tragedy for the people concerned, it is part of a move away from manufacturing in the wider economy

"This is part of a process of rationalisation that is going to continue.

Locations

"It is difficult to see steel production continuing in the UK let alone in Wales."

The company employs around 8,000 people in Wales, comprising 3,000 at Port Talbot; 1,500 at the Llanwern processing plant near Newport; 1,000 at Trostre in Llanelli and 800 at Shotton in Flintshire with the remainder at various ancillary works and services.