Possible sale of Celsa Steel mills sparks uncertainty for Europe metals markets

Reports that Spain-based long steelmaker Celsa is exploring selling off its steel production mills in Norway, Poland and the United Kingdom have prompted unease across European metals markets, sources told Fastmarkets on Friday February 16.

Talk of the potential sale comes during a choppy financial period for Celsa Steel, which was bought by creditors following years of issues over payment just six months ago.

Celsa, a major producer of long steel in Europe, also owns major steelmaking units in Spain and France. It is one of the largest buyers of ferrous scrap in the local markets in which it operates, including Spain and the UK.

A Celsa spokesperson said on Friday that “no decision has been taken regarding sale or acquisition of assets.” The spokesperson also noted that the company has undertaken an “exploratory exercise” with financial institution Citi to “assess the real market value of our assets.”

But a UK steel market source with knowledge of the matter told Fastmarkets on Friday that Celsa is indeed “looking to sell off some of its steel mills,” including its UK unit. That source said he believed jobs at Celsa’s facilities would be safeguarded in the short term, however.

“These mills are some of the ones that make money, whereas there have been issues with the workforce in Spain that they are struggling with,” the source said. “Even if they sell, they must ensure that jobs are kept for three to four years,” he said, but “you never know” with such a process.

In Poland, Celsa owns steel mill Huta Ostrowicec, located in Ostrowiec Swietokrzyski. The facility has two electric-arc furnaces (EAFs) with a combined capacity of around 2 million tonnes per year of crude steel. Celsa Huta Ostrowiec produces rebar and special bar quality (SBQ) steels.

In Cardiff, Celsa has two EAFs with a combined capacity of 1.2 million tpy of crude steel; that facility produces long steel products, including rebar and wire rod.

In Mo i Rana, Norway, Celsa has a 700,000-tpy EAF and produces rebar and wire rod.

Effect on Poland market
Celsa is one of only three rebar producing companies in Poland. Therefore, any change to or closure of Celsa’s assets there could have a major impact on the country’s steel market.

A distributor source in Poland told Fastmarkets that, sooner or later, the new creditor owners of Celsa Group were expected to sell Celsa’s assets in Europe. But that source said it was too soon for the creditors to do so, indicating that they believed Celsa’s owners were simply evaluating the situation to decide on future steps.

“From my point of view, it is too early to do that now. The market situation is not that good. I cannot imagine who will eventually buy the Polish assets now,” that source said.

A second Polish distributor source described the reports of a potential sale of Celsa’s plant in Poland as “rumors.”

Effect on UK market
Celsa’s position as one of the UK’s major scrap buyers and long steel producers means its operations are critical to supply and demand in both markets.

Its site in Cardiff has a nameplate capacity to produce around 1 million tonnes steel per year from an EAF, but market participants have long believed that the unit is running at reduced capacity utilization levels, Fastmarkets understands.

“The news is just breaking, but personally I do not expect any impact and business continues as normal,” a UK scrap processor source said.

A UK scrap source said that he believes the market would reserve judgement until a new owner comes in and states its plans for the company.

“All eyes will be on Cardiff ops, naturally,” he said.

Although there are no immediate changes expected, a third scrap source said that uncertainty over the company’s position could mean they need to be “careful” selling scrap to Celsa in the UK amid worries over payment.

Interestingly, the potential sale of the UK asset comes at a time when the country is moving toward greater adoption of EAF steelmaking. Both British Steel and Tata Steel have announced their intentions to switch to EAFs and away from their higher carbon-emitting basic oxygen furnaces (BOFs).

As a result of the planned rise in EAF capacity in the UK, the third source said that the UK could eventually become a net importer of scrap, swinging from its current role as a major exporter.

The UK typically generates around 10 million tonnes per year of steel scrap; of that, 8 million-9 million tonnes is exported, mostly to Turkey and the Indian subcontinent. A smaller amount is exported to short-sea destinations, such as Spain.

Restructuring plan
The reported sell-off of assets is the latest landmark in a challenging period for Celsa Group.

Creditors of Celsa, which included investment banks such as Deutsche Bank, finalized their takeover of the steelmaker in November 2023 following years of missed payments. At the time, media reports indicated that the process to sell up to 20% of the company could be launched a few months later.

This led to the implementation of a major restructuring plan, which had been approved by a Spanish court ruling in early September, to drive down Celsa’s debts and increase efficiency. The plan will allow the company to reduce its debt by €1.4 billion ($1.5 billion) and extend the maturity of the remaining debt by five years, until October 2028, Celsa said last month.

Celsa appointed Jordi Cazorla as chief executive officer of the company on November 24; Cazorla took over from Sergio Vélez, head of FTI Consulting Spain, who had acted as interim managing director.

Celsa’s most recent submission to the UK’s Companies House, on January 13, shows that Matthew Johnston of FTI Consulting LLP was delegated authority over Celsa Steel UK and has been conducting day-to-day management of the company from December 8, 2023.

According to a filing to Companies House, Celsa Steel UK lost £250,000 after tax in 2021 and made £3,000 in profit after tax in 2022. The company recorded an operating profit of £2.99 million in 2022, but £2.4 million went to interest repayments, the documents show.

Declan Conway in Galway, Ireland, and Julia Bolotova in Brussels, Belgium, contributed to this report.

Published by: Lee AllenDarina Kahramanova