Posted on 14 Jun 2024
British steelmaker Liberty Steel plans to sell its troubled Liberty Ostrava steel plant in the Czech Republic, while initiating bankruptcy proceedings. This is reported by ArgusMedia.
The company is withdrawing its preventive restructuring plan to begin bankruptcy proceedings under the insolvency law.
The restructuring of Liberty Ostrava is complicated by the weak steel market in Europe and an indefinite delay in the allocation of emission quotas by the government. Earlier, the Czech government indicated that the reason for the plant’s downtime was the revision of these quotas and called on Liberty to pay debts incurred to an energy supplier and others.
Liberty said that the delay in the provision of quotas caused losses in the restructuring plan of €43 million and increased the risk of insolvency. The previous restructuring plan depended on the sale of emission allowances as well as hot rolled coil prices, which were expected to reach €950/t in July. At present, hot-rolled coil prices are more than €300/t lower than those envisaged in the plant’s restructuring plan. Thus, these factors resulted in a loss of €1 million per day.
Market sources suggest that the company will face difficulties in finding buyers for the Czech plant. At the same time, this may help to preserve the asset and write off the debt, but relations between the company and the government have been very tense in recent months.
Liberty’s financial position seems to have deteriorated recently, leading to the mothballing of Liberty Merchant Bar and a plan to sell or “recapitalize” its EU rolling lines. The company also recently shut down a blast furnace in Galati, Romania, citing a lack of raw materials. The Rotherham plant in the UK has produced less than 10 thousand tons of steel this year, well below its production capacity.
As of December 21, 2023, Tameh suspended energy supplies to Liberty Ostrava, which completely halted the plant’s production. The sole energy supplier suspended operations due to non-payment of bills by Liberty.
As GMK Center previously reported, Liberty Steel, with steelmaking capacity of over 14 million tons per year and rolled steel production of over 24 million tons per year, is gradually losing ground on the global steel market.
The main factor affecting the company’s performance is the unfavorable situation on the European steel market. In 2022 alone, Liberty Steel’s European division reduced steel production by 1.396 million tons (-27.5% y/y) – to 3.68 million tons.
Liberty Ostrava is an integrated steel mill with an annual production capacity of approximately 3.6 million tons. The company serves mainly the construction, machine building and oil and gas industries. The company is a leader in the production of road fencing and pipes for the Czech market. In addition to the domestic market, it supplies its products to more than 40 countries.
Source:GMK Center
