European steelmaker ArcelorMittal has stopped supplying hot-rolled coil (HRC) to UK-based Liberty Steel's galvanising lines in Europe, as many other suppliers to the group also slash their exposure.
Delivery performance from the Liege-Dudelange lines has been poor after earlier HRC supply disruption last year, when ArcelorMittal stopped selling to the lines. Supply was restarted eventually after negotiations. But the company has stopped again for fear of non-payment, because of Liberty's financial problems in light of the administration of primary lender Greensill Capital. The lines are heavily reliant on supply from ArcelorMittal.
Some customers of Liege-Dudelange have been waiting for material that should have been delivered in May 2020, while others recently concluded contract renegotiations after Liberty had to renege on earlier deals because of rising feedstock costs.
Liberty will have to secure HRC in the open market — at a time when supply is extremely tight, and its finances strained — if it is to honour those renegotiated deals going forward, depending on its existing inventory levels. Some market participants said current stocks will only last for a few weeks.
Mills are increasingly talking about the third quarter, even for HRC, so prompt material is extremely difficult to find.
The news will be a big blow for those relying on material from the site, which is likely to see hot-dipped galvanised (HDG) steel hitting and exceeding ArcelorMittal's recent €920/t offer level very quickly, unless import prices soften rapidly. Liberty is the primary producer of Aluzinc and aluminised galvanised steel in Europe.
Any stoppage of the galvanised steel lines could have serious repercussions for Liberty, which so far has seen its UK businesses bear the brunt of the fallout from Greensill's administration.
Liberty will temporarily close its speciality steels business and furlough staff this week to conserve cash, after it could not procure sufficient scrap on the cash upfront terms needed to feed its furnaces this month. Market participants suggest the power provider has a credit insurance policy on the business that lapses this month — as does one of its major scrap suppliers. Its Newport HRC mill is only producing for two weeks out of every four, with staff on furlough, market participants said.
