Hungary's government has made "every effort" to save the country's largest steelworks, while India's Liberty Steel, which acquired the Dunaferr factory (as it was formerly called) in a liquidation procedure in late 2022, has "failed to fulfill its commitments", the economy ministry state secretary Mate Loga said at a press conference on October 1.

The ministry said it was in constant communication with Liberty on plans and made payroll for 3,500-4,000 people in Dunaujvaros, central Hungary.

ISD Power, the energy provider for the steelworks, which has been under liquidation for the past 1.5 years, has filed a liquidation procedure against two Liberty Steel subsidiaries (Duna Furnace and Dunarolling) for failing to settle invoices for about a year.

Dunaferr was taken over by Liberty Steel, part of industrialist Sanjeev Gupta’s group, for €55mn in late 2022 after a liquidation procedure with the promise of turning around the troubled steelmaker. Liberty Steel stepped in to save the Hungarian company by providing 40,000 tonnes of coal in early 2023 to ensure its continued operations.

In February 2023, it reached a contract manufacturing agreement with the government to produce hot-rolled coils for its coil coating operations. The company promised to upgrade green production with an agreement with Chinese CISDI Engineering.

The National Economy Ministry criticised Liberty Steel for not fulfilling its obligations.

The statement highlights that the company pledged to gradually ramp up production at the steelworks to 100,000 tonnes per month over four months from February. The state contributed around HUF70bn (€180mn) to save the company, including wage guarantees and the use of emissions quotas.

Transitioning production at the base to green steel would require a further investment of HUF200bn, the ministry added.

Liberty Steel issued a statement late on October 1 saying that it sought to restore Dunaferr's production capacity and re-enter the market, leveraging its contracts and access to the European network after buying the firm.

It went on to say that despite the government’s support, it struggled to secure working capital from Hungarian banks, largely due to the declining market and uncertainties in the European steel industry. This financial challenge resulted in lower-than-expected production volumes and intermittent operations.

Nevertheless, Liberty retained all employees, introduced a 10% wage increase, and provided bonuses. The company also established supplier partnerships and formed a consortium with Chinese state-backed support to invest in new electric arc furnaces. Additionally, Liberty acquired external funding to restart production.

The UK-Indian group acknowledged that the dispute with SD Power, related to a pre-acquisition agreement, poses a legal challenge. The company remains firm in defending its position and is actively negotiating with the Hungarian government to resolve the issue swiftly and ensure long-term business sustainability, the statement adds.

The financial situation of the steel plant is at a critical point, financial website Portfolio.hu noted.

Liberty Steel announced on June 10, a day after Hungary's local elections, that it would shut down its two remaining cokes in operation, which practically means the end of steel production at the largest steelworks in Hungary.

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

It seems that the British-Indian group has failed to adopt a profitable business model to turn around the company. Instead, it has sought financial help from the government and sold carbon production quotas based on average production in previous years to generate proceeds, Telex.hu noted.