Italian government ArcelorMittal both set to be part of the new Ilva: sources

Talks on the future of ArcelorMittal Italia, the largest Italian steelmaker, have intensified between the government and company representatives as the Nov. 30 deadline to define its future structure approaches.

Sources said the parties involved are close to finalizing the company’s future. It is considered possible that the Italian government will take a stake in ArcelorMittal Italia via Invitalia, Italy’s agency for investment promotion and enterprise development, and that ArcelorMittal will stay in the company, unless a “coup de theater” occurs at Ilva, as has sometimes been the case in the past.

Reinforcing this market talk, Invitalia CEO Domenico Arcuri a few days ago told unions that Invitalia could take ownership of the former Ilva with “not a minority” stake and this would included 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 should 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, said Arucri, as confirmed by an Invitalia spokesman Nov. 17.

At stake 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.

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.

Sources said that as ArcelorMittal has worked very 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 newCo.

So If is likely that both Invitalia and ArcelorMittal will be in the newCo, Arvedi — the country’s second-largest flat steel producer – is expected by informed sources not to be interested in any minority stake, as had previously been suggested.

Arvedi and ArcelorMittal declined to comment when reached by Platts.

ArcelorMittal Italia CEO Lucia Morselli had been expected to update unions about the ongoing negotiation on Nov. 17, but the meeting has been postponed to next week.

Currently, ArcelorMittal Italia is working at one of its lowest-ever rates, casting around 7,300-7,500 mt/d, from just two of its four blast furnaces.

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.

— Annalisa Villa