Ownership uncertainty compounds Dunaferr issues

Uncertainty over the future ownership of Hungarian steel producer Dunaferr is compounding the company's financial problems, with customers no longer prepaying for coils in fear of contracts not being honoured.

This, combined with the company's deteriorating financial state, means it could be insolvent by Christmas, according to a banking source. The mill is producing at around half of its capacity, using lower-grade iron ore.

One of the company's shareholders, Ukrainian businessman and politician Serhiy Taruta, has been accused of making a "hostile raid" on the company to try and cash out his share before finances deteriorate further. He has tried to line up a potential sale to Ukrainian producer Metinvest, which is reportedly not ready to commit at this time. Tension between Russia and Ukraine complicates the matter further, so Metinvest may prefer to wait until the asset is restructured, the source said.

Dunaferr management has reportedly opposed the "raid" by Taruta.

A major Russian steelmaker and mining firm could be considering investing in Dunaferr, alongside Hungarian investors, with Russian bank VEB currently owning around half the company.

By Colin Richardson