Liberty House mulls stake in troubled Italian steel mill

24 March 2017

Liberty House, the industrial and commodities group that is buying up steel assets around the world, is considering investing in the troubled Italian Piombino mill as the global market picks up from a slump, two sources close to the matter said.

The mill is owned by Algeria's Cevital Group, which has approached British financier Sanjeev Gupta, Liberty's executive chairman, after failing to secure enough financing to upgrade the complex on Italy's west coast, one of the sources told Reuters.

Cevital is looking to form a partnership with Liberty to run the plant, but discussions are at a very early stage and the exact terms of any deal are still unclear, the source added.

A spokesman for Liberty House said the group "is interested in looking at any relevant investment opportunity in the steel industry".Cevital was not immediately available for comment.

The Algerian firm, involved in food, automotive, industrial and logistics sectors globally, bought the Piombino complex in 2014 from what was then Italy's second largest steelmaker, Lucchini.

Cevital had presented a 400 million euro investment plan for the plant, one of Italy's main industrial complexes, but it failed to deliver after running into funding difficulties.

At the time of the purchase, global steel prices had already fallen sharply from a peak in 2009 but they have been recovering steadily since hitting the bottom about 15 months ago.

A banking source said Piombino needs additional investment of up to $100 million. The mill is running well below full capacity and might have to shut down completely if it can't secure more money, the banking source said.No one was available for comment at Piombino.

Sanjeev Gupta's businesses now generate annual turnover of more than $6 billion. In the past year alone, he has spent around $630 million on acquisitions, including Rio Tinto's aluminium smelter in Scotland and the Tungsten bank business from British financier Edi Truell.

With a strategy of buying mostly distressed assets, Gupta is also bidding to buy Australia's bankrupt steel producer Arrium and three steel businesses in the United States.

Steel futures in China, seen as a global benchmark, have risen 120 percent since hitting their lowest ever levels in December 2015, thanks to Beijing's industry-heavy economic stimulus and moves to cut excess capacity.

The impact has been felt globally, with the Thomson Reuters Global Steel Index, which tracks equities, up 95 percent since its lows hit in January 2016, tempting players like Gupta who was bullish on steel even during the downturn.

Liberty is part of the Gupta Family Group (GFG), which includes the energy and commodities business SIMEC run by Sanjeev Gupta's father. The family's assets span steel mills and aluminium smelters to hydro-power plants and a private bank.

The Piombino complex, which employs around 2,000 people, has a total capacity of 2.5 million tonnes annually. A trade union source at the plant put current smelting production at 600,000 tonnes, with the rest of the plant closed. It was declared insolvent in 2012 and placed into special administration, battered by slowing demand and stiff competition from Asia.

Italy is Europe's second largest steel producer after Germany.