Conflict between Liberty Steel and the Hungarian government escalates due to Dunaferr downtime

Relations between Liberty Steel and the Hungarian government are deteriorating amid prolonged downtime at its Dunaújváros steel plant and financial difficulties. The Hungarian government has recently warned that Liberty’s Dunaújváros unit could face bankruptcy and liquidation if problems with salary payments and production resumption are not resolved soon, Kallanish reports.

Last week, the Hungarian Ministry of Economy demanded that Liberty Steel immediately pay salaries to Liberty Dunaújváros employees and criticized the company for failing to fulfill its obligations to restart production. The situation escalated after energy supplier ISD Power filed a petition in early October to liquidate Dunarolling Dunai Vasmű, the rolling division of the plant in Dunaújváros, due to energy supply arrears.

The Ministry of Economy reminded that until June last year, Liberty Steel had received significant government support, which allowed it to save jobs and support employees’ families. However, according to the government, the company failed to fulfill its promises to develop the plant and resume production, instead “constantly misleading the public.” The government noted that it is ready to intervene to protect employees and ensure that they are paid from the wage guarantee fund if the company is again unable to pay wages on its own.

In October, the Hungarian government passed a resolution that allows for the acceleration of bankruptcy proceedings and the quick appointment of a receiver to ensure payments to employees. If this happens, Liberty Steel’s Hungarian operations are likely to be liquidated in the short term.

This is a marked deterioration in relations between Liberty Steel and the Hungarian government, which at the beginning of the year was still looking for joint solutions to keep the plant in Dunaujvaros operating. In October, Liberty said that despite government support, it was unable to secure working capital due to difficulties with lending from Hungarian banks. One of the reasons for these difficulties was the instability of the European steel market.

In a comment to Kallanish, Liberty Steel representatives noted that discussions with stakeholders did not yield the expected results. Although the company paid salaries last month, it expected that this would give time to find solutions to support the business. However, the progress made was not enough to resume production.

The company announced that the interim administrator is initiating salary payments to employees through a salary guarantee fund to prevent financial losses for employees while Liberty Steel considers strategic options for the future of the plant. The statement also said that Liberty is ready to cooperate with all parties to preserve the plant.

Currently, the blast furnace at the Dunaujvaros plant has been idle since last year, and the rolling lines are used only intermittently. In June, the company began the process of closing two coke oven batteries, and in August, it was announced that China would provide a €1.3 billion financial guarantee to modernize the Hungarian plant, including the conversion to electric arc steelmaking.

In January-September 2024, the European Union increased steel production by 1.5% compared to the same period in 2023, to 97.8 million tons. Global steel production for the period fell by 1.9% y/y – to 1.39 billion tons.