It is "impossible" for ArcelorMittal to remain in Italy after the Milan Tribunal ordered the shutdown of Ilva's blast furnace 2 (BF 2) this week, market participants said.
Since the court-ordered decision, the company has told unions it will lay off 3,500 workers, which is unlikely to be taken well by the government.
The decision came just days before a scheduled and highly anticipated meeting between the Italian government and the steelmaker, intensifying the pressure on local Italian authorities to shut down the mill. The Ilva assets were linked to high cancer rates and pollution in Taranto under its previous owners, while local authorities alleged that BF 2 had not had its safety improved after an accident in 2015. The death of a worker in July 2019 at Ilva's iron ore loading terminal did not help Arcelor's case.
The Taranto public prosecutor ordered the shutdown of BF 2 in July, but on 20 September ArcelorMittal was granted a 90-day extension. This meant it had until 19 December to improve the safety of the furnace, but some expected this to be delayed further, as the steelmaker worked with the government to draft an improved industrial plan: however, after Italy removed the legal immunity of ArcelorMittal managers, making them prosecutable for issues under Ilva's previous ownership, the company notified authorities of its intended exit from the investment on 4 November, giving Italy 30 days to take over the plant.
The steelmaker has faced multiple challenges in Italy, including the aforementioned BF 2 shutdown and stripping of the penal shield, amid declining steel prices and a weakening of demand for flat steel products across Europe. As such, it was no longer economically viable, but many saw the announcement as a bargaining tool to reduce employee levels.
Many no longer see the mill as a market maker despite its output being among the highest in Europe, as many buyers prefer to not take on risk over deliveries in the coming months. It is uncertain who, if anyone, will operate Ilva. Some customers had covered first-quarter needs with bookings from competitively priced imports over the October-November period.
Yesterday ArcelorMittal informed workers' unions that it will make 3,500 workers redundant, placing them under cassa integrazione, which would see the Italian state pay them a partial salary as a result of the shutdown of BF 2. "[ArcelorMittal] are using workers as human shields," Uilm secretary-general Rocco Palombella said.
But unions have flipped between being in support of ArcelorMittal and not. The issue of employment numbers was key to the steelmaker's bid for Ilva in 2017 and after pressure from the unions and the government, it agreed to retain 10,000 of the 14,000-plus workers. Other European producers with similar output operate with less than half of this number of employees.
Turmoil at Ilva has only partially stoked the Italian flat steel market so far.
Some expect the shutdown of BF 2 to give the steelmaker an additional push to leave the Italian market, as it intensifies its loss-making in Taranto, with only two out of five furnaces on line.
Others expect to see the government working to overturn the order, as even if control of the plant returns to the Extraordinary Commission, it could be forced to produce at rates as low as 2mn t/yr, making Ilva an even less sustainable asset, which Italy would likely struggle to find interested investors for post-ArcelorMittal.
By Lora Stoyanova
