Financial Services, Latvia, Markets and Companies, Metals Market

Talanov said that the decision was based on market developments. "According to the current forecasts, demand on the market will decrease about 10%, which is why we decided to temporarily stop buying raw materials."

KVV Liepajas metalurgs estimates that the decision will reduce the company's losses in February by EUR 600,000.

Talanov declined to say when the company could resume operations.

KVV Liepajas metalurgs may have problems with current assets after the Treasury exercises its right to assets the company has pledged as collateral, Talanov previously told LETA.

This is what the Treasury did on January 26, reducing KVV Liepajas metalurgs' obligations to the state by EUR 10.7 million in total. The company believes that such unexpectedly aggressive move by the Treasury, representing the State of Latvia as the largest creditor of the company, will impact the company's relations with customers and suppliers, and make the company's operations difficult.

As reported, after KVV Liepajas metalurgs metallurgical company had missed a payment of EUR 2.7 million that was due to the Latvian state in late 2015, the Treasury has started drawing on the collateral.

The steel plant tried to negotiate an extension of the payment deadline but failed to meet the conditions set by the government for debt rescheduling. Therefore the Treasury started drawing on the collateral provided by KVV Liepajas metalurgs. In particular, the Treasury invoked a guarantee issued by Russia's Alfa Bank and valid until late January.

So far, the government has recovered one-fifth of the amount it had paid to Italian bank UniCredit when the steel plant could not repay to UniCredit a state-guaranteed loan.