The Czech government would be prepared to step in and take over the country’s biggest steelmaker, Liberty Ostrava, if such a move were to become necessary, industry minister Karel Havlicek told the country’s parliamentary lower house May 6. Ostrava’s parent company, Liberty Steel Group, announced May 5 that it might consider selling some units as it restructures and refinances after the March collapse of its major financier, Greensill Capital.
Havlicek said the state could “intervene” during a verbal report and debate on current concerns over the Ostrava steelmaker.
“The state declares that if the situation becomes critical and if it appeared likely that the company would collapse and people would lose their jobs and that the whole region could be affected, then it is prepared for such an extreme solution [as state intervention] and we have already prepared for that option,” Havlicek said. The minister however indicated that the current situation probably did not call for such action.
Havlicek pointed out in his report that the previous government of Andrej Babis had taken a similar step and nationalized the country’s sole hard coal miner, OKD, in April 2018 when “no other path was possible.”
Havlicek’s comments come amid tension between the Czech government, local trade unions and Liberty Steel’s managers and owners over the future of the 3.6 million mt/year capacity integrated Ostrava mill amid the financial squeeze besetting Liberty Steel Group and its parent GFG Alliance. Tensions escalated when emissions allowances owned by the mill were sold April 30 to Liberty’s Galati mill in Romania, despite promises to Havlicek and Czech prime minister Andrej Babis that this would not happen.
Turned-around
Liberty Steel said May 5 that it “will fix or sell underperforming units” following the appointment to its board of a four-strong team of restructuring specialists. Sources close to Liberty however indicated that the company would opt to keep the Ostrava mill along with other performing businesses, including Liberty Galati, which have turned around their operations in recent months.
In a move likely to ease tensions May 7, Liberty Steel Ostrava said in a statement that all the proceeds from the sale of emissions allowances to Liberty Galati have been paid onto the company’s account.
“The Ostrava steelmaker now has on its account the whole of the Koruna 1.24 billion [$59 million dollars] from the sale of its unneeded 1.0 million carbon emission allowance] units to sister company Liberty Galati,” Liberty Ostrava said in the statement. Part of the amount has already been used to pay bonus to the Czech mill’s workers with the remainder to be used for investments at the Ostrava mill, it added.
Liberty Steel added in its latest statement that the Ostrava mill would be able to buy the emissions allowances back at a lower price than those prevailing on the market if they were needed in the future. “This legal transaction, at a high profit, has fulfilled the company’s pledge that the allowances owned by the Ostrava mill will continue only to be used for its benefit,” it added.
Management urges return to normal
Ostrava mill’s production director, Vaclav Habura, called in the statement for a return to normal working. “It’s now necessary that we continue with our normal business and focus on production and meeting the needs of our customers and attempt to take the best advantage of the current situation on the market, which is the most favorable in recent years,” he added, referring to the spate of high global steel prices and firm demand.
Labor unions at the Ostrava mill have been on strike alert since April 16 over concerns about the impact of the parent company’s financial problems on local operations. They stepped up their action April 26 with announcement of a work to rule, which includes a ban on overtime, adding that the moves will impact steel production at the Czech mill.
— Chris Johnstone
