Steel Mills

ArcelorMittal Bidding for Italian Steel Mill Ilva

Written by Sandy Williams

ArcelorMittal has made a joint bid with Marcegaglia SpA to purchase Italian steel plant Ilva. In an announcement on June 30, the consortium outlined their plans to bring the troubled mill up to environmental standards and increase production.

If successful in it its bid, ArcelorMittal plans to return the three blast furnaces at the plant to profitability and raise the crude steel output to 6 million tonnes from 4.8 million tonnes by 2020. ArcelorMittal also plans to introduce new steel grades to increase the proportion of high value-added steel products in Ilva’s mix.

Geert Van Poelvoorde, executive vice president and CEO, ArcelorMittal Europe Flat Products said in a joint statement:

“In recent years Ilva has been through some tough times that have affected all of its stakeholders, including employees and the local community. It is in need of a strong partner and immediate investment to stem the significant losses and guarantee a sustainable future. In ArcelorMittal, Ilva will find an experienced and committed partner ready to transfer its financial support, management know-how, operational expertise and product technology. We have carried out extensive due diligence and are satisfied that with targeted investments and a robust plan the plant can be successfully turned around.”

The other bidder for the operation is Cassa Deposit e Prestiti (CDP) with Italian steelmaker Arvedi and businessman Leonard Del Vecchio. Although terms of the offers were not disclosed, Reuters reported that the CDP group would probably bid between 500 million and 1 billion euros ($1.1 billion).

The submission bids is the first step in a multi-stage process in which only the environmental part of the offers will be discussed for the next 120 days. Following the 120 day period the government will provide further information on the offer process.

Ilva, formerly owned by Riva Group, has been under special administration by the government of Italy since 2013 after a court order temporarily shut down a portion of the plant for environmental violations. In 2012 toxic factory emissions were found to contribute to a high mortality rate from cancer and respiratory disease in the Taranto region.

Earlier this month the Italian parliament extended the deadline for the environmental clean-up at the Taranto plant another 18 months to the end of 2019. The buyer of Ilva will be allowed to modify the current clean-up program.

“The environmental problems of the plant are well documented,” said Van Poelvoorde. “In line with the tender process, we have submitted a detailed environmental plan that outlines the investments we believe are required to bring environmental performance in-line with European standards. In general we support the aims of the AIA although in some instances have requested changes to how the performance limits are met.”

The Italian government provided a 300 million-euro bridge loan for Ilva to remain in operation while the clean-up is carried out and a new owner is found. According to the parliament decree, the loan must be repaid by the company following the transfer of the company to a buyer. In January 2016, the European Commission challenge the loan, opening an investigation to examine whether the state support gives Ilva an unfair advantage not available to its competitors.

Ilva current debt is estimated at three billion euros ($3.3 billion).

Latest in Steel Mills