Hungarian integrated flat steel producer Dunaferr has gone into administration, with the mayor of Dunaujvaros, the industrial town where the mill is located, appealing to the national government to take it over, with the emergence of a private investor, he said, remaining “very uncertain.”
The court ordered the liquidation of Dunaferr and appointed a temporary administrator. The moves follow the announcement published this week on the Dunaujvaros municipal website.
Plant management did not respond to the request from S&P Global Commodity Insights for comment, but the information was confirmed by a source there.
The mill is under administration, faces a court ordered liquidation, several top managers were fired, an ex-Dunaferr employee also told S&P Global, adding that Dunaferr’s electricity supply has been shut off because of prior arrears.
“For many years we listened to the state saying that it would buy the steelworks, but the owner was not willing to sell it,” Mayor Tamas Pinter said in a statement. The steelworks should now be taken over by the state, he added.
“In 2020, the [Hungary’s] bankruptcy law was amended so that in case of strategically important companies, the state has the right of preemption, even then we thought and trusted that this amendment was made because of Dunaferr,” Pinter said.
According to the mayor, the intervention by private investors was unlikely, as in the last two-three years there have been several parties interested in Dunaferr, but without any resulting deal.
The local government has put forward two principles it wants the plant’s future owner to guarantee.
“There are two important things, one is that the plant continues to operate in such a way that the entire production spectrum remains,” Pinter said. “The so-called liquid [steelmaking] phase has been around for a long time. I do believe that it is needed and should not be abandoned during the liquidation.”
Another important thing is that all workers continue to receive their full wages, the mayor requested.
If a private investor is not found and the state does not nationalize the plant either, the outcome would be a tragedy for Dunaujvaros and the whole of Hungary, according to Pinter.
Dunaferr has been idled since the third quarter: the mill suspended its two blast furnaces, with combined capacity of 1.2 million mt/year, in August and September due to disruptions to its coke supplies.
Dunaferr still legally belongs to Russian bank Mezhekonombank, which holds 51%, with the remaining 49% shared between two Ukrainian businessmen.
“The owners, the Russian bank and the Ukrainian investors, did not want to invest or even manage the asset, and the change of ownership will be good news for this steelworks,” said the source, adding though that a future owner should be prepared to lose a lot of money.
“To run the mill properly, it should be ramped up to 80,000-100,000 mt/month minimum, and the cost of iron ore, coke, electricity and other consumables would equal several million dollars, if not tens of millions of dollars a month, according to the source.
On top of that, according to several sources, the mill has amassed over half a billion dollars in debt comprised of unpaid carbon quotas and feedstock and some outstanding shareholder loans.
Traders and industry sources S&P Global spoke named several candidates for Dunaferr: steel production, processing and trading group Duferco; Liberty Steel Group; Ukrainian mining and steel company Metinvest; and Chinese steel company Hesteel, the owner of the Zelezara Smederevo mill in Serbia.
— Ekaterina Bouckley, Maria Tanatar, Diana Kinch