“Thyssenkrupp and Liberty Steel Group have agreed to enter a further process phase. Liberty Steel will shortly begin detailed due diligence and thus gain insight into key business data [on] Thyssenkrupp's steel business," Liberty said in a statement seen by Fastmarkets.

Liberty announced in October that it had made a non-binding indicative offer to buy Thyssenkrupp’s steelmaking business.

Should it go ahead, the acquisition would create Europe’s second-largest steel producer by combining Liberty’s steelmaking capacity of about 10 million tonnes per year with Thyssenkrupp’s 11.5 million-tpy capacity, according to Fastmarkets’ calculations.

The acquisition would allow Liberty to secure a sustainable supply chain to feed its Liège-Dudelange processing lines, in Belgium and Luxembourg, which currently bring in about 2.5-3 million tpy of HRC from other European mills, including ArcelorMittal, according to the market sources.

Liberty Steel's Liège-Dudelange sites were reportedly cancelling or delaying galvanized coil deliveries starting from last week, due to being unable to secure feedstock, several sources told Fastmarkets.

“Liberty's Benelux sites cannot deliver hot-dipped galvanized coil (HDG) to customers, [due to] lacking hot-rolled coil for production,” one trader said.

“The shortage of HDG in the European market exacerbates the situation at Liberty's Liège-Dudelange sites,” a second trader said.

“The continuing Covid-19 situation and related supply disruptions have temporarily [affected] shipments from Liberty Liège-Dudelange. These issues are being resolved using our normal commercial mechanisms. We apologize to any customers [affected] by this issue and expect shipments to return to normal soon,” Liberty said in the statement.

Liberty Dudelange-Liege comprise three production sites - at Flémalle and Tilleur in Belgium and at Dudelange in Luxembourg - each  producing cold-rolled coil, HDG and tinplate.

HRC prices in the EU continued to increase in December, pushed up by tight supplies.

Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe at €565.77 ($671.26) per tonne on Wednesday, up by €2.02 per tonne from €563.75 per tonne on December 31. The index was up by €15.32 per tonne week on week and €60.77 per tonne month on month.