Magona grapples with financing issues despite firm orders

The Liberty Steel Magona coil re-rolling plant in Piombino is enjoying strong demand and full order books, sources close to the company tell Kallanish. Keeping the plant running however has become challenging due to the lack of banks’ written guarantees.

No banks in Italy are said to be willing to work with Magona at present or to provide guarantees. Sales and purchases are currently implemented on an upfront cash payment basis. The company is now working with weekly visibility. The main issue however remains feedstock procurement, as suppliers of hot rolled coil are said to be asking for bank guarantees even in case of upfront cash payments.

The only reason keeping Magona “alive”, sources say, is the current drastic coil shortage and the skyrocketing value of hot-dip galvanised coil, which is quickly approaching €1,100/tonne ($1,315) base ex-works in transactions.

One source believes Magona is destined to be idled unless its owner finds a solution to obtain a “serious and large written guarantee” from local banks.

Magona has a capacity of 600,000 tonnes/year. It counts one pickling line, two rolling mills, two galvanising lines and one coating line. One more galvanising line was idled in 2010. With a substantial investment on this line, the company could reach a capacity of 900,000 t/y, sources observe.

“From an operational point of view, the plant is running as normal benefiting from its successful improvement plans over the last 18 months and the recovery of market conditions,” a Liberty spokesperson says. “The management team at Liberty Magona have successfully undertaken significant self-help measures to speed up cash flow and temporarily reduce working capital, including reducing cash-absorbing stocks, through matching stock to customer orders; working with customers to achieve trading terms that will bring in cash earlier, and working with suppliers to achieve greater flexibility over payment terms.”

Natalia Capra France