Liberty looks to cut costs at Speciality Steels

UK-based steelmaker Liberty Steel is looking to reduce costs at its speciality steels business in Yorkshire, market sources told Argus.

Costs and staffing at the business are high, and the firm is analysing how it can cut them to cope with the challenging market environment.

The company's two main scrap suppliers recently have reduced their shipments, with at least one not supplying at all. Haulage documents also suggest the other has not sold to the company in the past few weeks. Companies have had issues getting credit insurance on Liberty, a wide array of sources said, and have moved to cash terms where possible.

A Liberty spokesperson said it was still procuring scrap from its primary suppliers, but had reduced the amount it buys for commercial reasons, and was using second-tier merchants to reduce pricing. The spokesman denied rumours that the mill is looking to extend its Christmas shutdown for another week or two.

Liberty also has professional services firm Grant Thornton on options for its Liberty Pressing Solutions business in Coventry, although the spokesman refuted claims that consultants are assisting with the speciality steels unit.

"Options under consideration include the possibility of strategic partnerships, joint ventures, new business development and acquisitions, as well as potential investors for the [Pressing Solutions] business," the spokesman said.

"It is well documented that the automotive market and its supply chain in the UK is challenging and needs consolidation."

Last month Liberty started an agreement with Italian company Marcegaglia at its precision tubes business in Oldbury. Marcegaglia will take on operation of the slitting and tubemaking lines, although Liberty will still employ the staff and run the sales and marketing function. Market chatter had suggested that Marcegaglia may look to acquire the business in year or so, but Liberty said it has no plan to divest the business as it stands.

Liberty has extended at breakneck speed in the past few years, transforming itself from a comparatively little-known trader to one of the world's top 10 steel mills outside of China. But the company has faced questions over its opacity and financing arrangements.

This opacity has hurt the company. Owner Sanjeev Gupta had to inject his own equity to raise a bond for the company's Australian steelmaking business, Infrabuild. At a recent event in Milan, Gupta told Argus that the unusually high 12pc interest rate on the bond was probably because of the transparency issues.

Gupta said he wants to bring transparency and clarity to the company's books, but admitted it is a large undertaking, given the sprawling nature of the assets over several jurisdictions.

By Colin Richardson