Hungary will provide $45 million to the Dunaferr steel plant to pay salaries

In the next six months, a working group will search for an investor

The Hungarian government will pay wages at the ISD Dunaferr steel plant in the amount of $44.8 million over the next six months, said the Prime Minister Viktor Orbán. Reuters informs about it.

According to Viktor Orbán, the working group, which includes a deputy from the ruling party from the Dunaujvaros region, where the enterprise is located, will make efforts in the next six months to find an investor who would turn Dunaferr into a viable business.

The pressure on the steel plant, which was already experiencing difficulties, was increased by the economic consequences of the war in Ukraine, the record level of inflation and the economic situation in Hungary.

Viktor Orbán noted on a Facebook that Dunaferr collapsed because of «previous owners, management and finally Brussels sanctions».

Accroding to ArgusMedia, in January, the UK’s Liberty Steel is likely to signed a contract with the Dunaferr liquidator to get the opportunity to manage the enterprise for 3 months. At the same time, Liberty Steel and the liquidator refused to comment.

At the end of December 2022, the Municipal Court of Budapest made a decision to liquidate the ISD Dunaferr plant. The plant received a temporary administration. At the same time, Tamas Pinter, the mayor of the city of Dunaujvaroš, where the plant is located, appealed to the government to take control of the enterprise, since the intervention of a private investor is unlikely.

The steel plant has been idle since the third quarter of 2022. In August and September last year, the company stopped the operation of two blast furnaces with a total capacity of 1.2 million tons per year due to interruptions in the supply of coking coal.

According to S&P Global sources, for the plant’s proper operation, production volumes need to be increased to at least 80,000-100,000 tons of steel per month. At the same time, the cost of iron ore, coke and other materials, as well as electricity to support the production process will amount to several million, if not tens of millions of dollars per month. At the same time, according to several insiders, the combine has accumulated more than $500 million in debt.

Traders and industry sources name several candidates for Hungarian Dunaferr: Duferco, Liberty Steel Group, Ukrainian group Metinvest and Chinese Hesteel, which owns the Zelezara Smederevo plant in Serbia.

At the beginning of 2023, Metinvest Group expressed interest in the acquisition of the Dunaferr steel mill, applying to the Hungarian government. The steel plant can provide a number of synergies for the Ukrainian company and corresponds to its strategy, allowing full use of its own raw materials – iron ore concentrate, pellets and coking coal. In addition, the European asset will provide Metinvest with its own supply of slabs for processing assets.

Liberty Steel is also interested in acquiring the enterprise. The company had been in talks with Dunaferr about a potential acquisition in early 2021, but the group’s interest cooled amid news of funding problems.