Steelmaker Dunaferr faces insolvency, seeks partner

Hungarian steelmaker Dunaferr is on the edge of insolvency and looking for a strategic partner to help it restructure and access to raw materials and financing, according to market sources.

The company appears to have lost the support of its shareholders, meaning it does not have sufficient working capital to cover its fixed costs, and is chronically short of investment.

The stretched cash position has forced the company to use more lower-grade iron ore this year, switching from higher-grade seaborne supply to KrivBass material from Ukraine.

Market sources say Dunaferr wants a partner that can approach the Hungarian government to help restructure it and provide a more sustainable footing. The company has 1.7mn t/yr of crude steelmaking capacity and 2mn t/yr of hot-rolled coil capacity.

Dunaferr is currently majority owned by a Cyprus-based subsidiary of Industrial Union of Donbass.

Dunaferr mainly sells commodity-grade HRC into northwest Europe — these sales account for around a quarter of its business.

Any investors would need to refinance the firm's working capital and repay bad debts, as well as tackle its collective agreement with unions. This agreement has made it impossible for the company to lay off staff during the pandemic, further damaging its finances. Dunaferr has also had no access to banking finance, forcing it to borrow at exorbitant rates.

Dunaferr refused requests for comment.

By Colin Richardson