Steelmaking is set to return to Cardiff after a Spanish firm signed a deal to buy Allied Steel and Wire.

Up to 600 steelworkers could be returning to work in the New Year if Barcelona-based company Celsa completes the deal to take over the troubled firm.

Receiver KPMG, which has been administering ASW, since it went into receivership in July, says it has entered into an exclusivity agreement with Celsa and hopes to hand over control of ASW by January 2003.

ASW went into receivership in July with 650 workers losing their jobs at the company's Tremorfa and Castle works but Celsa says it hopes to employ around 600 when the plant reopens next year.

Former workers at ASW said they hoped to get their jobs back now a possible buyer had been found.

Phil Jones, 54, a steelworker at ASW for 33 years said: "Everyone is very pleased that a buyer has been found and steelmaking is coming back to Cardiff.

"We would welcome a meeting with Celsa to show our commitment and loyalty.

"We would also hope that everyone who was made redundant gets their old job back."

KPMG hopes the proposed deal will take place in January 2003, but the exact terms are subject to confidentiality clauses.

As part of the deal, ASW's plant in Sheerness, Kent, will close down with the loss of 190 jobs.

Richard Hill and Roger Oldfield, Joint Administrative Receivers at KPMG Corporate Recovery said: "We are pleased to announce the agreement reached today with Celsa Group and we hope that completion of the proposed sale will enable steelmaking to return to Cardiff.

"Clearly, we are saddened that we have had to take the decision to cease production at the Sheerness site, but we will continue to make strenuous efforts to save all that we can."

Welsh Economic Development Minister Andrew Davies said: "Today's announcement that the major Spanish steel maker Celsa is the prospective buyer of ASW's assets is a very important step forward.

"We now know formally who we are dealing with and that a final decision will be made in January.

"The First Minister Rhodri Morgan and I will be discussing progress later today with a senior director of the Company to hear at first hand Celsa's next steps.

"Those made redundant by ASW now know that discussions will continue until January and the Welsh Assembly Government's effort to convince Celsa that reopening the Cardiff plant will not only be good for the Welsh economy but exceptionally good for them, will see a major gear change now that we have formal confirmation of Grupo Celsa's involvement." Juan Carlos Orozco, from Celsa, in an interview for BBC Radio Wales, said the deal was not yet finalised, but he confirmed that if it goes ahead, the company hopes to create up to 600 jobs at the ASW site in Tremorfa.

Following the announcement of ASW's closure in July, the steelworkers received a further blow when they were told they would not receive their full company pensions due to a shortfall in the fund.

Their campaign to bring steelmaking back to Cardiff and to regain their pensions saw them hold a march through Cardiff city centre while a delegation travelled to Blackpool to picket the Labour Party conference.

ASW specialised in wire products

Rhodri Morgan spoke to workers