Hungary scrambles to save country’s largest steelworks

Hungary scrambles to save country’s largest steelworks
Hungarian courts launched the process of putting the ISD Dunaferr plant into liquidation on December 14. / bne IntelliNews
By Tamas Csonka in Budapest December 15, 2022

Hungary’s largest steelworks is finally being put into liquidation, which could pave the way for a rescue by the UK's Liberty Steel.

Hungarian courts launched the process of putting the ISD Dunaferr plant into liquidation on December 14 following a government amendment to the bankruptcy law to ensure it could take place. 

According to financial news site, the economy ministry is in talks with Liberty Steel, owned by Indian-born British billionaire Sanjeev Gupta, which could potentially buy the company.

Liberty had been in talks with Dunaferr over a potential purchase in early 2021, with  Gupta meeting Hungary's foreign affairs and trade minister, Peter Szijjarto, to discuss the acquisition. However, the company's interest cooled after news broke of its financing problems.

Other buyers, including Metinvest and a consortium from Kazahkstan, expressed interest in acquiring the company last year.

Liberty Steel has been asked by Hungary to send coal to ISD Dunaferr, to avoid a shutdown of the plant's coking batteries, according to UK energy and commodities news website Argus.

Dunaferr was scheduled to shut its coking batteries at 6am today because of a lack of coal, but the plant was informed by a government source that material would be rerouted from Poland. It is not yet clear who will pay for the coal, sources told Argus.

Dunaferr, located 75km south of Budapest, is on the brink of collapse from rising energy prices and has been late paying employees.

Dunaferr idled both its blast furnaces in August and September because of a lack of cash, and has been awaiting state help. The company is days from shutting down its remaining furnace, putting the entire operation at risk, which prompted a swift intervention by the government.

The impending liquidation procedure of the company could guarantee its long-term operation with a change of ownership. The steelworks is 50% owned by Cyprus-registered Steelhold Limited, with Russian and Ukrainian owners behind the offshore entity, who have battled for control of the Hungarian company for years. Russia’s Vnesheconombank – which is sanctioned by the US – holds 50% plus two votes.

Dunaferr is one of Hungary’s largest industrial companies and the largest employer in the region with more than 4,000 employees. Keeping the company’s operations and safeguarding jobs is a priority for the government, Portfolio was told by the energy ministry.

The company has not yet published its 2020 and 2021 annual reports. According to the last publicly available data, it incurred HUF54bn (€132mn) in losses on net sales of HUF289bn in 2019.

The local government of Dunaujvaros earlier allowed Dunaferr to reschedule HUF2bn in local business tax that ensured the company's operations for a few weeks, said mayor Tamas Pinter of the opposition Jobbik party on Wednesday, calling for the government to facilitate the change of ownership.

Dunaferr’s current owners were not available for comment.