CRU: Italy to take over ArcelorMittal plant

ArcelorMittal, which owns 62% of Taranto, responded by saying it was surprised and disappointed to learn via media reports that Invitalia had called for the special administration, as that proposal was not mentioned during an emergency board meeting held on Sunday, Feb. 18. “This is an egregious breach of the investment agreement,” the AFP news agency quoted the company as saying.

The Luxembourg-headquartered group also reiterated it is seeking an orderly exit from the public-private partnership, Acciaerie d’Italia (ADI).

Italy’s economic development minister Adolfo Urso said: “[ArcelorMittal] doesn’t have the intention to invest in the company. I believe that the country is justified in reappropriating the fruit of its labor and the sacrifices of entire generations.”

The government prepared the ground for special administration back in January.

Ownership uncertainty returns at ADI

To some extent we have been here before. The former Ilva was placed in special administration in 2013 amid a long-running legal case against its former owners Gruppo Riva centering on violations of environmental standards that were associated with elevated incidences of cancer in the local population around Taranto. In 2021, this case led to multiple managers, politicians, and consultants associated with Ilva receiving jail sentences, including 22 and 20 years, respectively, for brothers Fabio and Nicola Riva.

After operating under special administration for five years the deal that led to ArcelorMittal taking majority ownership of Ilva was agreed to in 2018. But Acciaierie d’Italia, as it was renamed, has often been in the news with stories – whether founded or otherwise – of discontent and apparent tension around the relationship between owners, operators, unions, and politicians. Operationally it has been running well below installed capacity. Reduced utilization is not something confined to ADI in the European steel industry, but steel is an emotive sector worldwide and any perceived weakness in it can be leveraged by various stakeholders to pursue their goals, whether that be employment levels, votes, or other factors.

At the time of writing, special administration has not actually taken effect, but the threat is that this will happen in the coming days. This may yet be a negotiating tactic. But with ArcelorMittal apparently prepared to exit, albeit on different terms, it seems that ownership changes will once again happen in Italy one way or another. What will happen next? If ADI is effectively nationalized, the government may look to increase production in the short term for political rather than commercial reasons. With sheet prices now falling in Europe, that would add supply into a weakening market and probably cause further short-term price falls. Longer term, there would be the question of what the future ownership structure looks like. Special administration is a tool but not a permanent solution, and the government has taken pains to highlight that it believes there to be interest from multiple parties in coming on board at ADI. One might keep an open mind on this. The political risk must surely now be perceived as elevated.

This article was first published by CRU. Learn more about CRU’s services at www.crugroup.com/analysis.