Liberty’s relationship with Czech government worsens

Market: Metals
10/04/24

The relationship between Liberty Steel — which owns the Ostrava plant — and the Czech government is breaking down.

Senior Czech politicians and GFG Alliance chairman Sanjeev Gupta held a meeting in Prague today to discuss the plant. GFG Alliance is a loose-knit collection of entities including Liberty Steel.

"I can say that the outcome of the negotiations was very disappointing," Czech Republic Minister of Industry and Trade Jozef Sikela said. "There may be more questions after today's meetings than there were before." Finance minister Zbynek Stanjura also attended the meeting, which the politicians said was at the behest of Liberty.

"Today's meeting with the ministers and their subsequent comments were very disappointing," a Liberty Steel spokesman told Argus. "The ministers showed very little understanding nor the willingness to understand the complex situation. We are afraid that the chances of positive dialogue going forward are bleak. It is important to highlight that we have always abided by all the laws of the country and are doing our utmost to protect the business, its creditors and its employees despite very difficult conditions."

The government has requested Liberty repay more than 8.2bn koruna ($346.1mn) owed to Ostrava from other group entities, including Liberty Finance Management. Liberty's latest restructuring plan for Ostrava envisages repayment of about half that amount, and no repayment to its major creditor Tameh Czech, which is owed more than Kc2bn. Tameh Czech's joint owners, ArcelorMittal and Tauron Energy, are trying to sell the business, which was reliant on Ostrava as its only customer.

The government is also uneasy about Ostrava's reliance on sales of carbon emissions allowances to generate income. Ostrava plans to sell another €44mn worth of emissions rights in May, after selling almost €360mn worth between August 2022 and October 2023, while buying just €183mn worth over the same period, leaving it with a clear deficit.

Liberty faces a reduction in the level of allowances provided to Ostrava because of reduced production in recent years — the company idled the last operational furnace at Ostrava in October and it has not restarted since.

Ostrava's restructuring plan envisages an average selling price of €950/t and above in July, more than €300/t aboveArgus' current benchmark northwest EU hot-rolled coil (HRC) index. The restructuring plan also focuses on production of flat steel, including HRC, cold-rolled coil and hot-dip galvanised. Market participants have questioned whether prices can rise to such an extent given the difficult macroeconomic backdrop.

It has been rolling imported slab at Ostrava and its Hungarian asset, Liberty Dunaujvaros, formerly known as Dunaferr. However, the Hungarian hot-rolling mill has stopped operating as 5,000t of slab at the site has not been paid for, so has not been released by creditors. Swiss and Italian traders have been helping finance some of Liberty's European purchases, according to multiple sources.

By Colin Richardson

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