The UK government is preparing to take over its third-largest steel plant
According to a court announcement, new administrators have been appointed to take control of Speciality Steels UK (SSUK), a Liberty Steel-owned facility in South Yorkshire. The company, which produces steel using scrap metal, has faced ongoing uncertainty due to its mounting unpaid debts, putting it at risk of liquidation.
This development comes after the government earlier this year took control of the British Steel plant in Scunthorpe to prevent the closure of the country’s last remaining primary steel production facility. SSUK hosts the UK’s largest electric arc furnace, known for its greater energy efficiency and expected to play a key role in the steel industry’s energy transition.
However, the company has long struggled with financial difficulties. The collapse of Liberty Steel’s main lending institution and growing unpaid debts have made it impossible for the company to purchase the scrap metal needed for steel production.
The fate of SSUK now rests with a judge in the High Court. Lawyers for Sanjeev Gupta, chairman of Liberty Steel’s owner GFG Alliance, warned that a potential liquidation order could spell the end of steel production at the plant. Gupta’s legal team has requested a postponement to allow the administrative process to be completed and argued this would avoid the need for direct government intervention.
Creditors’ lawyers, however, submitted a letter from the government to the court, providing assurances that the steelworks could be taken over if necessary. Creditors, who are owed hundreds of millions of pounds, have petitioned the court to force the company into liquidation so its assets can be sold to repay debts.
GFG Alliance, which operates in the energy, trade, and steel sectors and employs thousands across the UK, has been under scrutiny since the 2021 collapse of its main lender, Greensill Capital. Sources close to Gupta have confirmed ongoing talks with investment giant Blackrock to provide new funding to acquire the company through a managed process known as a “pre-pack” administration.
While the government supports policies to back the steel sector, it has repeatedly rejected direct financial aid requests from Sanjeev Gupta. As a result, two difficult options lie ahead: allowing Gupta to retain control of the company, which would likely see much of the creditors’ debts written off but avoid costs to the government; or the government taking over the loss-making steelworks to ensure creditors are paid, a process that could be both costly and lengthy.
In a statement, the government emphasized: “We will continue to closely monitor developments regarding Liberty Steel, including public hearings. We support the appointment of an Official Receiver to take necessary action should the company enter compulsory liquidation.”
Liberty Steel responded, saying, “Our commercial solution, supported by major private equity, will deliver the best outcome for the company, employees, and all stakeholders, without costing UK taxpayers or causing unnecessary uncertainty.”
Liberty’s Ostrava sale garners mostly local interest
The sale of Liberty Steel’s Czech Ostrava iron and steel works has garnered interest from a number of parties, mostly local but including Indian company Jindal Steel, a delegation from which showed up at the mill in May, industry sources said June 18.
Other potential buyers included Trinecke Zelezarny, another major steel producer in the Czech Republic with a capacity of 2.5 million-2.6 million mt/year, Czech industrial holding CE Industries (CEI) known in the steel industry for having provided Czech third-largest steel producer Vitkovice Steel with tolling financing, and Czech energy company Sev.en Group, the sources said.
Liberty Steel declined to discuss the sales process and the above-named entities were not available for comment.
Given the ongoing risks and uncertainties, Liberty Steel last week announced a sale of Ostrava and its judicial reorganization under the Insolvency Act.
It had worked on several restructuring plans for Ostrava, including a mid- to long-term transition to electric arc furnace technology.
In April, Sanjeev Gupta, head of GFG Alliance, an umbrella group which Liberty Steel is part of, met Czech finance and industry ministers but the latter found the plans “weak” and “unconvincing” with no breakthrough achieved on the mill’s restart, sources said.
Steel production at Ostrava was halted in the fourth quarter of 2023 when Liberty Steel in October idled blast furnace No. 3, the last remaining operational BF at its Ostrava steelworks, citing poor demand in Europe as the main reason.
Some downstream mills continued rolling, using up previously acquired semi-finished steel stock. Ostrava’s blast furnace No. 2 was idled in July 2022 for repairs and an upgrade but has never been restarted.
Ostrava’s restructuring was hampered by external factors, primarily a further deterioration of market conditions in Europe, an indefinite delay in the allocation of emissions allowances to the business from Czech authorities, Liberty Steel said, adding Ostrava was filing for a judicial reorganization which will provide the time and protection to undertake its sale.
The sale decision was in the best interests of Ostrava’s creditors, employees and customers, said Liberty, which intends to maintain the few assets which cover their own costs and support employees in applying for the state’s Wage Guarantee Scheme.
The Ostrava plant is the Czech Republic’s biggest steel producer capable of making up to 2 million mt/year at full steam. Liberty Steel acquired it from ArcelorMittal in July 2019. After years of underinvestment, it says it injected Eur143 million ($153 million) in the plant and led to its best performance in a few years in 2021-22.
In 2021, Ostrava produced a five-year high of liquid steel at 2.28 million mt with the plant’s two blast furnaces producing 1.93 million mt of hot metal during the year, but last year, its steel production declined to 1 million mt, according to local media reports.
Katya Bouckley
