ArcelorMittal, Italian government in partnership for a green Ilva

The agreement on ArcelorMittal Italia’s future, the largest Italian steel producer, is closed to be signed and it will relaunch the former Ilva, Giuseppe Conte, Italian Prime Minister said on Nov. 24 on a video call at the presentation of the Association for the development of South Italy, Svimez 2020 Report. This is seen as a confirmation that ArcelorMittal will remain a shareholder in the steelmaker.

“Just in these days we are defining the agreement with ArcelorMittal to complete the investment project in the name of a public-private partnership for the Ex Ilva of Taranto,” Giuseppe Conte said. “…we are offering an articulated plan to relaunch the Taranto site … in a marked direction of the energy transition.”

The declarations of Conte came just few hours after Italian national representative unions met with the CEO of ArcelorMittal Italia, Lucia Morselli. According to union sources, Morselli also confirmed that that they are close to finalize the agreement. “AM is likely to stay with the government that will enter in the company but we have no idea yet about the percentage, neither about the industrial plan. That is the reason we still want to call a strike,” an union source who was present during the meeting told S&P Global Platts.

Last week the Italian unions called two hours of strike on Nov. 25 to call for a responsible future of the Italy’s largest steel plant and to be included in the negotiation with ArcelorMittal.

At stake there are the jobs of around 10,700 workers at the plant, which is why it is so important for the Italian government to keep the company operational. ArcelorMittal agreed to buy Ilva in 2018 under a lease-and-purchase agreement for Eur1.8 billion and to invest another Eur2.4 billion to clean up and modernize the plant, which has been dogged by environmental issues. Following legal issues with the Italian state, ArcelorMittal in early March reached an accord with Italian authorities over the future of the former Ilva group, amending the existing lease and purchase agreement. The agreement left ArcelorMittal with the right to withdraw from its Ilva purchase by the end of November 2020, subject to the payment of a fine of Eur500 million. The lease-and-purchase agreement may extend until May 2022.

Invitalia, Italy’s agency for investment promotion and enterprise development, is the government arm that will be used to enter in the partnership. Last week, Invitalia’s spokesman, confirmed to Platts that Invitalia could take ownership of the former Ilva with “not a minority” stake and this would include modernizing both Blast Furnace 5, the largest in Europe, with a production capacity of around 3.5 million mt/year, and idled in 2015, and Blast Furnace 1, still in operation. In addition, two electric-arc furnaces would be introduced to the steel plant, to maintain a production capacity of 8 million mt per year, a move probably capable of maintaining current employment levels.

Industry sources said that as steel demand has slumped throughout Europe due to the pandemic and steel overcapacity is likely to continue to be a problem, it is unlikely that the Taranto works will be able to maintain a very high crude steel output for the foreseeable future. However, some sources with knowledge of the plant underscored the necessity for Taranto to operate at a rate of at least around 6 million mt/year to stay in the black.

ArcelorMittal Italia at the moment is casting around 7,300 mt/day of liquid steel, that is its lowest historical rate from just two out of its four blast furnaces.

Sources said that as ArcelorMittal has worked hard to achieve its $7 billion net debt target and is now prioritizing cash returns to shareholders, it is possible that the company wishes to keep Ilva out of its consolidated earnings in the new company.

ArcelorMittal declined to comment when contacted by Platts.

— Annalisa Villa