The Hungarian government has stepped in to pay the October wages of Dunaferr steelworks employees after its UK owner Liberty Steel failed to meet its legal obligations despite multiple requests, the government announced on November 15. Dunaferr has not been operating since June.

Dunaferr is the second Liberty Steel operation in Central Europe to collapse following the insolvency and close down of most of Liberty Ostrava, the largest Czech steel mill, in June. Struggling Liberty Steel, which is part of Indian industrialist Sanjeev Gupta’s GFG Alliance, has operations in Central and Eastern Europe in Romania and North Macedonia that are also in financial distress.

The Hungarian state payment affected approximately 3,500 workers and amounted to about HUF2bn (€4.9mn) from the Wage Guarantee Fund. In the statement issued on Friday, the national economy minister accused the company of "failing to fulfill its commitments".

The company has struggled to pay wages on time in recent months and has put employees on a reserve list, reducing base wages.

The state-owned interim asset supervisor initiated the procedure to tap the state wage guarantee fund earlier this month after the Indian owners signalled they have no available funds to pay the October wages, which essentially means the insolvency of the company.

Earlier this month, the government in a decree set strict guidelines for compensating workers from the state wage fund and called on the company to cooperate as Liberty Dunaujvaros did not have a separate bank account for receiving money from the wage guarantee fund.

The government claimed credit for saving Hungary's largest steelworks last year, as its former Russian and Ukrainian owners had fought for ownership of the firm for years. The government had already thrown the company a lifeline and transferred some HUF16bn (€41mn) to cover payroll costs in early 2023 after Dunaferr was put into liquidation in December 2022.

Low steel prices paired with the rise in energy prices, supply chain issues and the war in Ukraine had put the company, with a workforce of 3,700, on the brink of collapse.

Liberty Steel stepped in to save the company by providing the Hungary factory with 40,000 tonnes of coal in early 2023 to ensure its continued operations. In February, it agreed with the government on a contract manufacturing agreement for the production of hot-rolled coil for its coil coating operations and a few months later it acquired Hungary's largest steelworks for about €55mn in a liquidation procedure and committed to pay an additional HUF37bn for environmental permits. It planned the transition to green steel production, which would have required an estimated HUF200bn in funding, but the company encountered financial difficulties affecting its other CEE units as well.

Last month, ISD Power, the energy provider for the steelworks initiated a liquidation procedure against two subsidiaries of the company, which effectively meant the insolvency of Dunaferr.

On June 10, a day after the EP and local government elections, Liberty Steel announced the shutdown of its two remaining coking plants in operation, putting an ending to steel production at the largest steelworks in Hungary.