Liberty Steel Dalzell imposes 'slab surcharge'

Liberty Steel Dalzell has imposed a £96.50/t ($136) "slab surcharge" on all orders for delivery between 1 June and 31 August, managing director Gordon MacRae said in a letter to customers obtained by Argus.

The company said its "principal domestic slab vendor", which is British Steel, has "unilaterally imposed unparalleled price increases on to our contractually agreed supply of raw materials" and that it had to pass these costs on to customers. Liberty also said British Steel had cancelled the delivery of contracted slab supply for three weeks, "which has already had a huge cost and operational impact on us".

British Steel said it does not comment on commercial inquiries. A source close to the company said Liberty did not take contracted slab in April, and costs have increased leading to the higher prices.

Market sources said Liberty, which buys slab on an ex-works basis from British Steel, has struggled to afford rail costs in recent weeks because of difficulties with working capital, and would now be paying more for the material it did not receive.

Customers and the market at large are trying to decipher whether the letter has anything to do with British Steel's Chinese owner's potential interest in buying Liberty assets — Jingye is reportedly interested in the plate mills and Liberty's speciality business.

Liberty has been struggling for working capital since its main lender, Greensill Capital, fell into administration, and is now subject to a Serious Fraud Office investigation focused on "suspected fraud, fraudulent trading and money laundering".

British Steel has ramped up structural section prices by £150/t since 5 May, so it is logical that it would hike slab rates too.

After the Liberty letter, most other plate suppliers withdrew from the UK market to reassess their offers, despite the company's price flying beneath the wider market, even with the surcharge.

Some service centres have distanced themselves from the company in recent months, given problems with delivery performance and the sharp media focus.

One stockholder duplicated an order it placed with Liberty elsewhere to ensure it secured the steel, according to market sources.

Liberty has reneged on deals for supply from its Liege and Dudelange cold-rolled coil and hot-dip galvanised lines in Belgium and Luxembourg. Some German customers were told they will not receive any material unless they supply hot-rolled coil substrate, as the company does not have material to feed the lines because of working capital difficulties. This includes customers whose prices were renegotiated by the company. Liege's Flemalle and Tilleur plants are under creditor protection until the end of July, while Liberty is looking to identify new financing sources for Dudelange.

Many suppliers to Liberty businesses have moved to shorter terms, including proforma payment before shipment, given its lack of working capital.

By Colin Richardson