Deadline arrives as two very different consortiums battle it out for Italy’s Ilva

yesterday by: Michael Pooler in London and James Politi in Rome

The fate of Europe’s biggest steel plant will edge closer towards resolution when a deadline falls on Monday for final bids to take control of the troubled facility in southern Italy.

The giant Taranto works, which has been at the centre of a saga involving environmental disaster, insolvency and temporary nationalisation, forms the core of the Ilva business up for sale by the Italian government.

At stake are not just thousands of jobs, but a region’s industrial heritage and a pillar of Italy’s manufacturing sector.

In contention are two rival consortiums with differing visions of how to turn around the century-old Italian industrial concern. One grouping is led by ArcelorMittal, the world’s largest steelmaker, alongside Marcegaglia, a family-owned Italian steel processor.

The other is an alliance between Delfin, the holding company of Italian sunglasses tycoon Leonardo Del Vecchio; the country’s sovereign wealth fund, Cassa Depositi e Prestiti; and domestic steelmaker Arvedi. It has been joined by Indian group JSW Steel, whose billionaire founder Sajjan Jindal has overseen an ambitious expansion.

“Ilva has a lot of structural advantages that today you don’t see because it isn’t run as well as it can be,” said Aditya Mittal, chief financial officer of ArcelorMittal. “It’s lacking capacity, in a state of disrepair but has the potential to become one of the lowest-cost and most efficient facilities in Europe.”

Rome took control of Ilva in 2015 after a court sequestered sections of it on the grounds it failed to contain toxic emissions.

There are already signs of improvement in financial performance. Revenues increased 5 per cent to €2.2bn last year, as losses narrowed to €220m on the industry’s preferred metric of earnings before interest, tax, depreciation and amortisation, from minus €545m the year before. he bids for Ilva come at a tense time in Italian politics, with general elections one year away at the latest. Internal division has consumed the ruling centre-left Democratic party as it seeks to fend off a challenge from the anti-establishment Five Star Movement, and a poor outcome for the auction of a company with 14,000 employees could widen the rift.

Ilva’s sale could also be pivotal for the Italian economy, since the country’s manufacturers have traditionally been heavily reliant on its supply of affordable steel.

So far, some leading Italian politicians seem to prefer the Jindal consortium’s proposals.

Mr Jindal has said his goal would be to nearly double Ilva’s annual production from about 6m tonnes at present to between 10m to 12m tonnes within a three-to-five year period. This is significantly higher than the 8m tonnes pledged by the ArcelorMittal consortium, which touts its successful record and scale.

“The Jindal group has a more ambitious programme in terms of investment and in terms of production,” said Massimo Mucchetti of the Democratic party, who is the president of the industry committee in the Italian Senate.

By contrast, Mr Mucchetti said the ArcelorMittal bid appeared more defensive in nature. “They want to avoid the entry of a dangerous new competitor in Europe,” he added.

*A spokeswoman for the Italian ministry for economic development declined to comment on the contest, signalling that the government is not taking sides.

Officials will consider each side’s environmental plan and industrial blueprint for the steel plant, Europe’s biggest by output capacity.

The Jindal consortium wants to build a direct reduced iron plant, which makes a feedstock for steelmaking using natural gas, as well as electric arc furnaces, which melt scrap to produce the metal.

Critics argue that Europe’s high gas prices make this unfeasible. ArcelorMittal has meanwhile pointed out Mr Jindal’s lack of experience in the continent. It intends to run the three currently operational blast furnaces, which produce molten iron from raw materials.

Alessandro Abate, an analyst at Berenberg, said that the Jindal plan would require significantly more investment than ArcelorMittal’s proposal.

“Ilva in ArcelorMittal’s hands would be significantly better and faster, industrially and commercially . . . it would be plugged into an already efficient supply chain,” he said.

JSW Steel did not respond to a request for comment.