Metalloinvest close to taking over Dunaferr operations

Russian mining and steelmaking company Metalloinvest is likely to take over the operations of Hungarian steelmaker Dunaferr in a matter of months, banking sources told Argus today.

Metalloinvest is still in discussions with Russian bank Vnesheconombank about the purchase of Dunaferr and configuration of the operating company, but is expected to take over day-to-day operations soon.

Dunaferr has a complicated ownership structure. It is majority owned by Cyprus-based Steelhold, which has not attended several shareholder meetings since Dunaferr's financial difficulties began, meaning the meetings could not go ahead. Steelhold itself is 100pc-owned by Ukrainian company Industrial Union of Donbass, controlled by Russian shareholders close to the state and spearheaded by Vnesheconombank.

Dunaferr has not received any support from its shareholder since October and has consequently faced severe strains on its working capital, resulting in it operating at as low as 30-40pc capacity. An increase in coil prices has allowed the firm to boost utilisation to 60-70pc. The company has 1.7mn t/yr of crude steel production capacity and 2mn t/yr of hot-rolled coil capacity, as well as cold-rolling and hot-dip galvanising capabilities. It sells around a quarter of its output into the domestic market and a similar amount into Germany.

A consortium from Kazakhstan had been interested in buying the company, as was UK-based Liberty Steel for a period — Liberty head Sanjeev Gupta met with Hungary's minister of foreign affairs and trade, Peter Szijjarto, in February to discuss Dunaferr, but Liberty's interest disappeared shortly after as the financial difficulties of its main lender, Greensill Capital, became clear.

Metalloinvest and Dunaferr could not be reached for comment.

By Colin Richardson