Scottish investment hopes rise as mothballed steel plant reopens

* Britain's largest steel plate plant reopens

* Scottish government brokered deal after plant closure

* Plan to ramp up output to 500,000 tonnes a year

By Russell Cheyne

MOTHERWELL, Scotland, Sept 28 (Reuters) - Scotland's last major steelworks reopened under the ownership of industrialist Sanjeev Gupta on Wednesday, heralded by Nicola Sturgeon's government as proof that the country can draw investment and protect industry in difficult times.

Liberty Steel bought the 144-year-old Dalzell plant in Motherwell and its sister works at Clydebridge in Glasgow in April from Tata Steel (BSE: TATASTEEL.BO - news) for a symbolic sum, with the Scottish government underpinning the process.

Tata mothballed the plants at the end of 2015 due to the impact of cheap Chinese imports, causing the loss of 270 jobs and sparking fears for the area's economy after the closure of a nearby plant in Ravenscraig in 1992.

Fresh from watching molten slabs of steel roll out of the furnace, Sturgeon described the revival of the steel plate mill as "a very positive signal that the steel and engineering industries still have a future in Scotland".

"It is a difficult market, but we now have a company in the ownership of Dalzell that has a vision of what they want to achieve," she told Sky News.

Britain's ability to compete in the global steel market was thrown into the spotlight earlier this year when Tata Steel put its entire British operations up for sale.

Several groups including Liberty have expressed an interest in those assets, which include the Port Talbot steel plant in Wales, but Tata is currently exploring options for a joint venture with Germany's Thyssenkrupp (LSE: 0O1C.L - news) .

Gupta said on Wednesday he was now also looking to open an electric arc furnace in Scotland.

"The most compelling place to build an electric arc furnace is the Midlands (in England) because it's a big generator of scrap and a big consumer of steel," he told Reuters. "But we are looking to do it in Scotland also, mainly because of the Scottish government, their enthusiasm.

"It's been a great experience working here."

In a nod to Gupta's Indian heritage, a steel pellet sculpture of Ganesha, Hindu god of beginnings, had been erected for the opening.

Sturgeon, who has said she may seek another independence referendum for Scotland, told a business conference in London on Tuesday that her country was consistently outperforming every part of the UK except London when it came to attracting inward investment.

Steel plate is used in industries like construction, shipbuilding, automotive, mining and energy sectors.

Dalzell is also looking to make plates for the manufacture of wind turbines and in the longer term could seek to supply projects like Hinkley Point, the new nuclear plant due to be built in southwest England.

Liberty has spent five months preparing to reactivate Dalzell's furnace and rolling mill to produce 150,000 tonnes of steel plate a year.

It has hired around 120 staff, mostly former employees, and hopes to increase output to 500,000 tonnes eventually, employing 200 people within 18 months.

Gupta said the Clydebridge works would come back on stream "in due course as market conditions allowed". Britain currently consumes 700,000 tonnes per year of plate steel, increasing at around three percent annually. (Reporting and writing by Helen Reid, Additional reporting by Maytaal Angel in London and Elisabeth O'Leary in Edinburgh; editing by Kate Holton)