Liberty Steel has withdrawn its restructuring plan for the Ostrava steelworks, it announced in the beginning of May. According to Liberty, this will give the company protection against creditors and provide the necessary time for selling the assets and further restructuring measures to stem losses.
Liberty added that the current financial losses of the Ostrava operations amount to around €1 million ($1.08) per day.
“Liberty is confident that this process is in the best interests of Ostrava’s creditors, employees and customers,” the steelmaker said.
Liberty said that it would retain the few assets that cover their own costs and support employees in applying for the state’s Wage Guarantee Scheme.
Liberty Ostrava has been facing financial difficulties for months, which escalated in December 2023 due to a dispute over unpaid bills with its power supplier Tameh Czech.
Liberty said that it started implementing a restructuring plan on May 3, but added that Tameh Czech had refused to provide further energy supplies to the Ostrava operations.
But the main reasons that hampered the plan, according to Liberty, were the deteriorating steel market conditions in Europe and the “indefinite delay” from Czech authorities in the allocation of emission allowances.
“While we were able to navigate the Covid pandemic, the outbreak of war in the Ukraine has seen demand for Ostrava’s products fall significantly. Imports have climbed to over 27% of the European market, impacting Czech domestic producers, which face far higher regulatory and decarbonization costs than their competition,” Liberty said.
The company added that independent market reports revealed a nearly 20% deterioration in market spreads and HRC prices compared to February estimates.
Moreover, the delay in allocating emission allowances has created “a significant and immediate financial hole of €43 million in the restructuring plan”, Liberty said.
Wider market
Liberty Ostrava is able to produce hot-rolled coil, cold-rolled coil, steel sections and wire rod.
In October of last year, the company idled its blast furnace (BF) No3 at the Ostrava steelworks, which was Liberty’s last operating BF in Europe, due to weak steel market fundamentals.
The company planned to reignite the furnace in January, but they were halted due to financial problems, industry sources said.
BF No2 at the Ostrava steelworks has been idled since July 2022 due to poor market conditions.
Liberty also idled a BF in Galati, Romania, in the end of May, Fastmarkets reported.
Attempts by European steelmakers to increase flat steel prices in late April and early May were largely unsuccessful due to sluggish real demand.
Since the beginning of May, prices for HRC in Central Europe have been broadly stable.
Fastmarkets’ weekly price assessment for steel hot-rolled coil domestic, exw Central Europe was €630-640 ($682-693) per tonne on Wednesday, unchanged since May 1.
Decarbonization plans
Liberty invested around €143 million in capital expenditures after it acquired the Ostrava steelworks in July 2019, including €29 million for the installation of two new electric arc furnaces (EAF), the company said.
The steelmaker did not provide further details about the future of its decarbonization plans for Liberty Ostrava’s assets.
In July 2022, Liberty announced it had ordered two hybrid EAFs for Ostrava from the equipment supplier Danieli.
The new EAFs were expected to be operational by 2025 and use 100% scrap as primary raw material by 2027. Switching to EAF-based production would allow Liberty to cut carbon dioxide emissions by more than 80% by 2027.
“We remain confident in the long-term viability of Ostrava under plans to transition to more sustainable forms of production based on electric arc furnace technology, whether under Liberty’s ownership, through a new investor, or under new ownership,” Liberty said.