GFG Alliance readies Liberty Steel, Alvance and SIMEC for IPOs

GFG Alliance, an international group of businesses founded by the British Gupta family, plans to take its steel, aluminum and renewable energy subsidiaries public in the foreseeable future, perhaps as soon as next year, executive chairman and CEO Sanjeev Gupta said in an interview with S&P Global Platts June 16.

The plan is to present Liberty Steel Group and Alvance Aluminium to the stock exchanges using their “green” credentials to attract investors, “when market conditions are right,” Gupta said. The group is accelerating plans to achieve carbon-neutrality, which may be achieved even before its target date of 2030, Gupta said. There are also plans to open up the capital of GFG’s SIMEC Group, active in renewable energy, mining, shipping and infrastructure.

Preliminary discussions for IPOs were shelved last year due to market conditions. Consolidation and restructuring ensued, to ensure transparency and appropriate governance for GFG Alliance’s growing subsidiaries, following market talk of opaque finances. Late last year the group’s steel businesses worldwide were consolidated into Liberty Steel Group, after several European works were acquired from ArcelorMittal.

“On 31 March we appointed a global board … a global audit is underway and we will publish quarterly results … we will prepare ourselves and do everything that a public company does: Liberty Steel, Alvance and SIMEC will enter public markets…. It’s a question of time, not if,” Gupta said. “In steel we’re almost ready: and Alvance and SIMEC are on their way. All three businesses are on this journey.”

Liberty’s aluminum assets, including Europe’s biggest aluminium smelter with a capacity of 280,000 mt/year in Dunkirk, France, bought from Rio Tinto; the UK’s sole smelter at Fort William, Scotland; and downstream assets have recently consolidated into Alvance Aluminium Group.

IPOs should allow the group “remodel our capital stack, which is heavily based on equities and short-term funding. We would like to have more permanent capital as well,” Gupta said. The businesses are profitable and have potential to become highly profitable, he said.

Despite GFG’s announcing last week a drive for 30% efficiency improvements in a market which has slumped as much as 20%-40% from pre-COVID-19 levels, Liberty Steel Group — now one of the world’s top ten steelmakers outside China — could eventually expand production further, according to Gupta. It’s possible that three of the company’s plants could double capacity in three to four years: the Galati, Romania plant, to 4 million mt/year; Whyalla, Australia, to 2 million mt/year; and Rotherham, UK, to more than 1 million mt/year crude steel capacity, he said.

However, he gave no date for capacity recently halted due to the pandemic to come back on stream. “Production for the time being is being calibrated with demand … we won’t dump … we won’t overproduce and we will keep our market share … the steel and aluminium markets will see pressure for the next year.”

Hydrogen market dynamics

COVID-19 may accelerate the move towards achieving “green” steel and aluminum because it may encourage emergence of supply chains “closer to home” and has highlighted the need for governments to help industry secure funding at good rates for achieving net-zero carbon targets, according to Gupta.

“Renewable energy becomes cheaper by the day,” he said, noting that natural gas-based steelmaking is a first step to hydrogen-based steelmaking, which should fit into “market dynamics” when hydrogen prices come down to $1-$2/kg.

Galati, and Liberty’s direct reduced iron-based Whyalla, Australia, steel mill, where direct reduced iron plants and new electric arc furnaces are being installed, will both eventually use hydrogen, and the company’s steel mill in the Czech Republic will be the first in Europe to use an EAF with hybrid technology, he said.

“We are going to announce pilot projects for hydrogen production in short order,” he said. The group plans to produce its own hydrogen for its plants, using solar power.

Liberty also wishes to get more involved in the scrap metals business in the UK, for use in EAFs. “We don’t need blast furnaces in the UK,” he said.

Green aluminum trading

GFG Alliance is a “strong proponent” of the London Metal Exchange’s plans to set up a platform for low-carbon aluminum trade, possibly next year. There’s a “strong customer pull for green metal,” even if it may involve a price premium: “that’s how we set the market,” he said.

Alvance’s operations are considered low-carbon, as its French smelter is powered by nuclear and hydroelectric energy and its Scottish one by hydroelectricity.

Gupta, meanwhile, considers the possible putting in place of a European Union carbon border tax “very urgent” to eliminate dumping in the EU of metal produced with less environmentally-acceptable standards.

M&A appetite

GFG Alliance continues with its appetite for mergers and acquisitions, which have formed the basis for its growth so far, viewing consolidation as positive for the industry, Gupta said.

“As a result of COVID-19 the pot is stirring and there will be a need for M&A activity: it’s become more compelling and will happen faster … fixed costs for steel are high, particularly in Europe, causing enormous pressures,” he said, without being drawn on which new targets GFG may currently have in sight.

— Diana Kinch, Annalisa Villa