Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Giorgia Meloni’s government is preparing to put Europe’s largest steelworks under special administration after failing to agree with ArcelorMittal on the plant’s future.
Rome’s announcement, expected as soon as Thursday, would come after a tense stand-off over the injection of €320mn urgently needed to keep the factory running — including payment of its outstanding gas bills.
The historic steelworks is being operated by Acciaierie d’Italia (AdI), a joint venture co-owned by ArcelorMittal, the Luxembourg-based international steel giant, and Italy’s state investment agency, Invitalia.
Formerly known as Ilva, the plant located in the southern town of Taranto has long been dogged by environmental problems and struggled to stay afloat, with production dropping to less than 3mn tonnes last year, compared with its capacity of 8mn tonnes. Earlier this week, a court ruled that the gas company Snam could stop supplying energy to the steelworks due to about €200mn in unpaid bills, though AdI has appealed.
But closing a factory that employs about 10,000 people would become a political problem for Meloni, who has vowed to strengthen Italy’s industrial base and create jobs.
Once it places the plant in special administration — an Italian insolvency regime intended to keep large illiquid industries operating — Rome will be able to appoint its own interim executive to take over management from ArcelorMittal while it seeks a buyer.
The move would bring the steelworks back full circle to 2018, when ArcelorMittal took control of the plant from special administration and was briefly hailed as the plant’s potential saviour before relations with Rome quickly soured.
During emergency talks in Rome last week, Aditya Mittal, chief executive of ArcelorMittal, told Italian ministers that his company was not willing to inject any more money into the business.
The government — which provided an emergency €680mn loan to the steelworks last year — has said Invitalia could inject the money itself and convert last year’s loan into equity, thereby becoming the majority stakeholder.
But the partners are at odds over how AdI would be governed if Invitalia had a majority stake, according to several people familiar with talks.
ArcelorMittal has also offered to exit the business altogether, but wants compensation of €200mn for its shares, and an additional €200mn for supplies provided to the factory, those people said.
After last week’s failure to reach a breakthrough, Italy’s economic development minister, Adolfo Urso, told parliament that “drastic intervention” was required to save the plant.
“These hours are decisive for immediately guaranteeing — in the absence of commitment from the private partner — the continuity of production and the safeguarding of employment in the period necessary to find other private industrial investors,” Urso told lawmakers.
Built in the 1960s, the Taranto plant was once a source of pride. But it proved an environmental disaster, spewing out lethal carcinogens that neighbours said were poisoning them and fuelling a surge of cancer cases.
In 2014, Rome took control, intent on finding new owners to clean up the ageing plant, restore it to financial health and increase production. In 2018, after a competitive bidding process, ArcelorMittal agreed to a €1.8bn lease-to-purchase deal, pledging hundreds of millions of additional funds for the environmental clean-up.
It sold off several of its other European steel plants to secure a green light from EU’s competition authority. But the following year, the anti-establishment Five Star party came to power and withdrew the legal immunity clause that protected ArcelorMittal from criminal liability for the plant’s environmental problems.
ArcelorMittal threatened to walk away, but instead agreed to form a joint venture with the public investment agency to run the plant together.
However, relations have remained fraught, with the two sides accusing each other of failing to live up to commitments. Surging gas prices in 2022 put further pressure on operations.
“It’s a situation that tells very much about the relationship between Italian politicians and companies,” said Carlo Calenda, a senator and former economic development minister, who helped negotiate ArcelorMittal’s entry. “They simply don’t know how to approach industry.”
Calenda said he was pessimistic about the factory’s prospects following the breakdown of relations with ArcelorMittal.
“My outlook on Ilva is very bleak. It will be very difficult for the state to manage a factory in a very competitive market.”
Additional reporting by Sylvia Pfeifer in London