UK urged to nationalize Liberty Steel after loan request refused

UK steel union GMB said March 29 a “Plan B” should be developed for Liberty Steel, including the option of taking the UK business into public ownership.

The UK government has rejected Liberty Steel’s request for financial support of GDP170 million ($235 million), according to news reports over the weekend.

“Now that the Government has stated it will not provide the bailout sought by Sanjeev Gupta, GMB will seek an urgent meeting with Kwasi Kwarteng, Secretary of State for BEIS to discuss ‘Plan B’. This must include all options, including taking the UK business into public ownership,” Ross Murdoch, GMB National Officer, said in a statement.

There are growing concerns in UK and in the rest of Europe where Liberty also has steel assets that the company has cash issues after its financier, Greensill Capital, entered administration March 8.

Liberty Steel is part of UK-based steel, metals and energy group GFG Alliance, owned by magnate Gupta and his family. It has grown rapidly in recent years, including by acquisition of troubled assets, to become Europe’s fourth largest steelmaker with a 6 million mt crude steel capacity in the region.

Of the group’s overall steel rolling capacity of around 18 million mt/year, some 10 million mt/year is in Europe, including 3 million mt/year in the UK, where Liberty employs around 3,000 people. The group employs some 35,000 staff worldwide.

GFG ‘operationally strong’

A GFG Alliance spokesman told S&P Global Platts the group as a whole continues operationally strong and benefiting from strong markets in steel, aluminum and iron ore.

“While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs,” the spokesman said in an emailed statement. “Discussions to secure alternative long-term funding continue to make good progress and while this takes place we have asked all of our businesses to manage cash carefully. Combined with the efficiency drive we’ve implemented over the past year this has ensured that most of our major businesses generating positive cashflows.”

GFG had said March 10 that some of its UK sites were operating intermittently. Market sources had expressed concerns over payment of supplies to some of its sites, particularly the niche steels units in northern UK.

“In the UK speciality steel business, where weakness in the aerospace market has cut demand for some products by 60%, we have been taking specific actions to stabilise the business and improve cash flow,” the GFG spokesman said March 29. “Activities on the sites include reducing steel stocks, matching stock to customer orders, and working with customers to achieve terms that will bring in cash as early as possible.”

Insurers back out

Since Greensill’s collapse, larger companies are reported to have struggled to acquire suitable insurance and stepped back from supplying Liberty Speciality Steels UK, including with steel scrap for its electric arc furnace. One major Asian supplier of steel feedstock and ferroalloys to Liberty’s UK and European works, including the Ostrava mill, told Platts last week its insurance company was withdrawing its credit limit on sales to Liberty from the start of April so it would be more difficult to continue to supply the works after that.

The UK government’s Department for Business, Energy & Industrial Strategy (BEIS) told Platts March 29 it is closely “monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions”.

A BEIS spokesperson underscored that the government has supported the steel sector extensively, providing GDP500million in recent years to help with the costs of energy.

“Our unprecedented package of COVID support is still available to the sector to protect jobs and ensure that producers have the right support during this challenging time,” the spokesperson said in a statement.

BEIS added that: “If approached for support, the government looks at the case for each company on its merits, to ensure that any decisions taken are in the best interests of the taxpayer. The Government is working with the sector, the unions and devolved administrations to support the UK steel sector to develop a long-term viable solution for the UK steel industry.”

Liberty Steel UK is the third largest steelmaker in the country — with nine sites across England, Scotland and Wales — producing both flat and long products.

European steel producers are currently enjoying historically-high prices due to market tightness. Supply and demand have been off balance since Q3 2020 as a demand pick-up after pandemic-related closures outpaced mills’ ramp ups, with mills battling technical problems and growing order backlogs.

Platts’ northern Europe hot rolled coils benchmark rose to Eur830/mt EXW-Ruhr March 26. In the UK market, prices increased to Eur790/mt DDP West Midlands UK, with availability limited.

The GFG Alliance spokesman declined to comment on discussions with government.

— Annalisa Villa and Diana Kinch