Huta Czestochowa – to be or not to be

The plant is insolvent again and may change its owner

Huta Częstochowa is a Polish plant with an electric arc furnace (0.7 million tons of crude steel per year) and plate mill (up to 1 million tons of plates). Its history includes different stages: first it developed as a traditional integrated steel plant (with blast furnaces and open-hearth furnaces), and then it turned into EAF plant (operational model that is currently popular given the “green” transition).

However, despite its relatively modern production facilities, the company has once again been declared bankrupt. A strange situation, considering the demand for plates in mechanical engineering, the military-industrial complex, and renewable energy. We decided to take a closer look at what is happening to better understand how the plant got into its current situation and what will help find a way out.

Huta Częstochowa – integrated steel plant

Construction of the plant began in 1896 on the initiative of Polish industrialist Bernard Ludwik Hantke. In 1902, the plant already had blast furnaces, a steelmaking shop and a rolling mill. In 1928-1930, the first significant modernization of production was carried out.

During World War II, the plant’s equipment was not damaged, that allowed production to be quickly resumed after the war. In 1947, the management prepared the first expansion plan, which included the construction of an open-hearth shop with 6 furnaces and a pipe rolling mill. In the 1950s and 1960s, new blast furnaces, a coke plant, and a sintering plant were also built.

In 1969-1972, a plate mill was built – this project was then considered the most important investment in the country. The launch of new capacities was associated with meeting the needs of shipbuilding and the necessity to reduce plate imports.

In the 1980s, Huta Częstochowa was the third largest steel plant in Poland (after the plants in Krakow and Dąbrowa Górnicza) – 13 thousand people were employed there. At the same time, modernization plan was being developed for Huta Częstochowa to transform it into EAF-based plant.

Huta Częstochowa – EAF plant and first bankruptcy

In 1994-1997, an electric arc furnace and a continuous casting line were built at the plant. Subsequently, other production capacities began to be closed, in particular 4 coke batteries, 2 sinter production lines, 2 blast furnaces, open-hearth furnaces, and a foundry. The last blast furnace and open-hearth furnace were decommissioned in 2001.

In 1998, the plant became a joint-stock company (Huta Częstochowa SA). 100% of the shares belonged to the State Treasury. As part of the restructuring, companies with assets not related to steel production (e.g. residential real estate, a medical clinic, a cultural centre, etc.) were separated from the plant.

1998-2001 – crisis period for the steel market. Huta Częstochowa SA was unable to service the debt associated with the construction of new production facilities, so in 2002 the company had to file for bankruptcy.

During the bankruptcy proceedings, in order to use the plant’s production potential and preserve jobs, a separate legal entity was created (Huta Stali Częstochowa Sp. z o.o.), which leased the steelmaking shop and the plate mill. More than 2,000 plant employees transferred to work for the new organization.

Huta Stali Częstochowa managed the plant’s assets for 3 years, after which in 2005 part of the plant’s steel production capacities, together with 12 subsidiaries, were sold to a strategic investor – the Industrial Union of Donbass (ISD).

In turn, the management of Huta Częstochowa SA, under the Act on state aid to enterprises of particular importance for the labour market, submitted a restructuring plan. It was approved in August 2003, so the bankruptcy procedure was stopped.

According to the restructuring plan, a large part of the debt was written off, and Huta Częstochowa S.A. (without production assets) was transformed into Regionalny Fundusz Gospodarczy S.A., which was obliged to pay off part of the debt to creditors by selling its assets (land, real estate and former plant service departments). Regionalny Fundusz Gospodarczy S.A. still exists, offering land to investors. In particular, the land bank in Częstochowa has more than 14 hectares.

ISD period

ISD paid 1.252 billion zlotys (about $334 million) for Huta Czestochowa and committed to invest 440 million zlotys ($118 million) in the steel plant over seven years. In April 2006, ISD took out a $275 million loan from a Polish banking consortium. $200 million was used to modernize Huta Czestochowa.

ISD also reorganized the plant. In 2008, the former coke plant was separated into Koksownia Częstochowa Nowa, which was sold to Zarmen Group in 2009. In 2011, ISD sold the pipe rolling mill to Alchemia Group. Thus, Huta Czestochowa concentrated on the production of plates.

In July 2013, ISD Huta Czestochowa shut down its steelmaking capacity, as it was more profitable to work on slabs from the Alchevsk Iron and Steel Works, which produced them using BF-BOF route – cost of such slabs, according to media reports, was almost $100/t lower than that of slabs made from EAF steel.

In December 2014, EAF steelmaking was resumed as the hostilities in Donbas interrupted slab supplies from the Alchevsk Iron and Steel Works. Media reports suggest that the operation of the electric arc furnace was unstable. In particular, it was stopped again in October 2015, and production was restarted in June 2016. According to available information, during 2011-2016, the ISD Huta Czestochowa electric arc furnace operated at a low load (33% on average), which dropped to 2% in 2014.

In May 2019, the steel plant ceased production. On June 28, the company’s management filed a bankruptcy petition for ISD Huta Częstochowa. Experts cite several factors that led to this result: the consequences of the 2008 economic recession, insufficient demand for the plant’s products (the bets on selling plates to Polish shipyards and a Polish car plant did not pay off), and the loss of control over the Alchevsk Iron and Steel Works, which ended up in the occupied territory.

Perhaps the most significant factor was the high debt on loans that ISD attracted for the modernization of both Huta Częstochowa and Ukrainian enterprises. This is the same reason that is associated with the first bankruptcy of the Polish plant.

Searching for new owner

On September 19, 2019, the bankruptcy trustee leased the plant for 12 months to Sunningwell International Polska z o., which resumed production at the end of the month. In April 2020, the bankruptcy court approved Sunningwell’s offer to buy the plant for PLN 220 mln ($58.5 mln). The time for signing agreement expired on October 5, but Sunningwell had not closed the deal, so the trustee had to announce a new tender.

The court agreed to extend Sunningwell’s lease until June 2021, but on 3 December 2020, the bankruptcy trustee terminated the lease early because production at the plant had stopped at the end of October.

On December 1, 2020, a new tender for the sale of the steel plant was announced. On December 23, the bankruptcy trustee signed a lease agreement with Corween Investments (a company from the Liberty Steel group). If ISD previously supplied slabs from the Alchevsk Iron and Steel Works to Huta Częstochowa, then Liberty established supplies of slabs from its plant in Ostrava (Czech Republic) to launch production.

On January 22, 2021, the Commercial Court approved the Corween Investments’ offer to purchase the plant for PLN 190 million ($51.4 million). On May 28, 2021, Liberty closed the deal and became the new owner of Huta Częstochowa.

However, in October 2023, Liberty Częstochowa stopped production and sent its employees (950 people) on downtime. The official reason was the lack of orders. In July 2024, the District Court of Częstochowa declared Liberty Częstochowa bankrupt and appointed an insolvency administrator.

Liberty did not want to give up and filed appeals against the bankruptcy decision, citing the restructuring agreement concluded with creditors. However, in October 2024, the court finally approved the bankruptcy decision, which opened the way to finding a new owner.

Liberty Steel in other European countries

European media point to a certain pattern in Liberty Steel’s activities in Europe – during periods of falling steel prices, the company cuts production at its plants, demands government aid and sells free carbon allowances. In particular, the bankruptcy of Ostrava plant is directly related to the government’s refusal to allocate free carbon allowances to the non-operating enterprise.

Let’s take a closer look at the situation at other Liberty Steel plants in Europe:

• In October 2023, Liberty Ostrava stopped steel production due to the interruption of electricity supplies because of non-payment – the company owes its electricity supplier Tameh Czech more than CZK 2 billion (€81.8 million). In June 2024, the court began bankruptcy proceedings against the plant. According to media reports, Liberty is looking for buyers to sell the Czech plant.
• In August 2023, Liberty shut down the only operating blast furnace at the Dunaferr / Dunaújváros plant (Hungary), and in June 2024, it decommissioned two coke oven batteries, completely ceasing coke production at the Hungarian plant. On October 1, 2024, ISD Power filed for liquidation of Dunarolling Dunai Vasmű (the rolling mill of the steel plant, which was separated into this legal entity), since Liberty had not paid for electricity for a year.
• Liberty Galati (Romania) periodically shuts down its only operating blast furnace. For example, there were 2 such shutdowns in the first 10 months of 2024: ​​BF was out of operation in January-February and May-July.
• In the UK, Liberty Steel’s Rotherham and Stocksbridge plants have seen most of their workforce laid off. In 6m 2024, Liberty Steel Rotherham produced around 10,000 tonnes of steel, meaning capacity utilisation was less than 2%.
• Liberty Liège-Dudelange (Belgium, Luxembourg) is also operating at low capacity and the company is considering selling it.

Let us recall that Liberty Steel acquired most of its European plants from ArcelorMittal, which had committed to sell them before buying the Italian Ilva plant. Liberty had committed to pay €140 million in deferred compensation, but ArcelorMittal has not yet received these funds. Therefore, in October 2024, ArcelorMittal filed a lawsuit in the High Court of England against Liberty Steel East Europe, demanding the introduction of external management.

Huta Czestochowa’s Prospects

Currently, the bankruptcy trustee of Liberty Częstochowa is looking for a new renter for the plant. The priority is to launch production capacity before winter. Subsequently, a new tender for the sale of the plant is planned.

Several companies have already expressed interest in participating in the lease tender. For example, Steel Mont (German trading company), Weglokoks (Polish coal exporter), and Metinvest (company with steel and iron ore assets in Ukraine).

Surprisingly, Liberty Steel, despite the above-mentioned financial problems, also intends to participate in the tender for the lease of Huta Częstochowa through its affiliated company Poviglio, which allegedly can provide financial resources to pay off the debt and pay wages for September. Why this was not done before the bankruptcy proceedings began remains an open question.

Polish state institutions will have to decide which of the submitted proposals is more advantageous for the development of the enterprise. For our part, we would like to emphasize the importance of choosing the appropriate new owner who understands the market and can ensure the smooth operation of Huta Częstochowa. Otherwise, in a few years, the plant risks going bankrupt again.