Poland must fight for its steel plate production potential

Yes, this market by 90% depends on imports. We are talking about the steel plate market in Poland. And this market is quite large – about 1 million per year in 2015-2023. But, surprisingly, local production is in crisis, and two out of three manufacturers have gone bankrupt in the last 10 years.

Steel plate is a sheet steel rolled product, typically with a thickness of more than 3 mm. Large consumers of plate are construction, renewables, shipbuilding and the defense sector. And for the latter, dependence on imports is unacceptable, since it weakens the country’s resilience.

There are three plate producers in Poland: Huta Czestochowa, Walcownia Blach Batory (WBB) of the Weglokoks group and the HSJ plant owned by the Cognor Group. Local plate production volumes fell by 50% from 625,000 tons in 2013 to 300,000 tons in 2023. This was due to problems at the largest producer, Huta Czestochowa, which has a capacity of up to 1 mln tons of plate.

The total capacity of the other two plants is ×3.5 times less – only 210 thousand tons. Judging by plate production volumes in Poland, according to WSA, WBB and HSJ are utilized quite highly. What does this mean? The market is starting to import, despite the presence of a local idled plant in Czestochowa. In other words, the potential of local production is not used.

The key sources of plate imports to Poland are Italy, the Czech Republic, Germany and Denmark. Imports from Italy (NLMK Verona), the Czech Republic (Vitkovice Steel) and Denmark (Dansteel) are products made from slabs of Russian origin. We can also add 5% of imports from Belgium (NLMK Clabecq). As a result, we`ve got that 47% of plate imports in Poland depend on Russia or 44% of the entire market. This is unacceptable in conditions when Poland is actively strengthening its defense to repel possible Russian aggression.

The EU’s overly soft policy has made it possible for Russian steel products to dominate, with high quotas on Russian slab imports, with postponed ban until 2028. Russian imports distort competition, putting pressure on flats prices in the EU in a weak market. In an effort to preserve jobs at Russian-owned plants in Italy and Belgium, the European Commission discriminates against jobs in Poland. The plate market is a good example.

In such circumstances, it is important to preserve production and human potential and resume full-scale operations at Huta Czestochowa, which is in permanent bankruptcy.

Last week, the Court approved the bankruptcy decision of the plant, the arbitration manager is looking for applicants to lease the assets, and in the future to sell the plant.

The domestic Weglokoks group, the German trader Steel Mont, and the Metinvest group, which has major assets in Ukraine, are named as applicants for Huta Czestochowa. Liberty Steel, which managed the plant in 2020-2023, showed active interest, but proved to be an ineffective investor.

Attracting an effective investor to breathe new life into the company, as there is enough potential in the Polish market. But there are also a number of challenges. This is the case when a number of problems pass to the new owner along with the asset. This increases the requirements for the future investor.

Given the “rent-for-sale” scheme, in order for Huta Czestochowa to start operating successfully, it is important to ensure working capital, sales and capacity utilization at the first stage. Sounds good, but difficult to implement. How to compete with products made from Russian semi-finished products? How to ensure the competitiveness of EAF production with a 25% higher electricity price in Poland compared to Germany? At the second stage, it is necessary to ensure investment, since the plant during the period of permanent bankruptcy clearly faced underinvestment in both maintenance and development projects.

With all due respect to the trading company’s business, Steel Mont, it is unlikely that a company with revenues of €100 million will be able to ensure the sustainability of Huta Czestochowa’s business. In addition, the company doesn`t operate a steel production business.

The Polish state-owned Weglokoks Group generates most of its business from coal mining and trading. But Weglokoks is already present in the plate market currently, operating a plate mill in Huta Batory with a capacity of 150 thousand tons. In other words, Huta Czestochowa’s capacity is large compared to the current scale of Weglokoks’ steel business.

Metinvest is trying to regain its position in the European steel market after losing two large plants in Mariupol. The company knows the plate market in Europe well, since before the war Ukraine was the largest supplier to the EU. In other words, it can be expected that Metinvest will be able to establish plate exports from Poland. Potentially, there is another synergy there. Huta Czestochowa could supply plate to the Ukrainian market, which reached 200 thousand tons per year in 2023-2024 and is supplied entirely by imports. In this way, the issue of sales can be resolved and the capacity of the plant in Czestochowa can be utilized in the first stage.

The scale of Metinvest’s business implies big numbers. EBITDA of Metinvest amounted to $861 mln even in the crisis year 2023, while CAPEX – was $283 mln. This leaves no doubt about the company’s ability to provide investments for Huta Czestochowa.

But the investor’s efforts may not be enough. Poland also needs to review its industrial policy, against the backdrop of the systemically worsening positions of all local steelmakers and growing imports. For example, we see a decrease in the production of flat steel at ArcelorMittal Group enterprises, the sale of the Polish asset of Celsa (Huta Ostrowiec).

The Polish authorities will have to make a difficult choice without the right to make a mistake. This will be the third attempt to revive the plant. The likelihood of normalizing the plant’s operations decreases with each attempt.

Andrii Tarasenko