Can Ilva’s new owner forge a brighter future for Taranto?

The clock is ticking down on the sale of Europe’s largest steel production site — Italian steelmaker Ilva’s Taranto steelworks — with the facility’s administrators confirming last week that the new owner will be announced in the first half of 2017.

The sale is being heralded as one of the most significant developments in the European steel sector in recent years, with the coinciding merger talks between Tata and Thyssenkrupp all pointing towards greater European steel industry consolidation.

With just two contenders left in the race – Accialtalia, a consortium formed by Italian steelmaker Arvedi and state-owned Cassa depositi e prestiti Group and DelFin Sarl on the one hand, and a joint venture between Luxembourg-based ArcelorMittal and Italian steelmaker Marcegaglia on the other. India’s Jindal Steel and Turkey’s Erdemir Group are still hovering in the background, having expressed interest in possibly joining one of the two consortiums vying for the facility.

But the winners will inherit a lot more than 11mn t/yr of heavily-indebted steelmaking capacity. They will be taking on one of the most fought-over political footballs in Italy’s recent history – one that has seen courts and authorities turning against each other for 26 years, and raised the question of how high a human price Italy is willing to pay for a steelworks that generates most of Taranto’s GDP and supports a host of downstream industries.

Any proposals to cut workforce or close the plant will generate a furious backlash from trade unions, already anxious for confirmation of job security, given that greater consolidation of Europe’s steel industry is expected to go hand in hand with capacity cuts. Indeed, this has been one of the great tensions of the Taranto story – health and safety versus job security and income stability.

The environmental horrors committed at Taranto – some alleged and others confirmed – over decades have generated an endless stream of hair-raising statistics: 386 local residents killed between 1998 and 2010 owing to exposure to toxic emissions; a spike in local cases of coronary events, respiratory diseases and malignant tumours; hundreds of sheep reared in the plant’s vicinity slaughtered in 2008 after dangerous levels of toxins were found in their meat and milk – all according to the European Parliament.

The Ilva case has exemplified the difficulties faced by not only Italy’s courts but also the EU in implementing environmental standards and regulations. Taranto first came under political scrutiny as far back as 1990, when the Italian council of ministers declared it an “area of high risk of environmental crisis”. What has followed is a succession of missteps, arrests and contradictory decrees, with different Italian courts, the Italian government, the European Commission, trade unions, farmers, local communities and even the international criminal court all wading in.

Over the years, there have been many examples of legislators tripping over each other in an attempt to handle the Taranto steelworks. One such example was seen in 2012-13, when Taranto authorities issued multiple orders in an attempt to halt operations, arrest Ilva owners and senior officials and seize products manufactured while many of the site’s facilities were under a seizure order.

But the Italian government intervened, enacting a new decree on 3 December 2012 that labelled the Ilva plant as of national strategic interest – thereby enabling it to resume steel production for up to 36 months, regardless of the existence of an order for the seizure of some of its facilities. The prosecutor of Taranto challenged the constitutionality of the new decree, but without success.

The introduction of new ownership might signal a new era for Ilva, with every bidder for the facility having had to detail their plans to not only lift it out of debt but also convince administrators of their ability to take an environmentally responsible approach. But the political wrangling that has plagued the Taranto site for more than two decades shows no signs of subsiding, with the governor of Puglia, Michele Emiliano, calling for the outright closure of the plant and wanting to appeal for Italy’s constitutional court to challenge the final decree authorising the sale of Ilva, which the senate passed in late July.

Meanwhile, many are sceptical about whether the future buyer will be willing to modernise the Taranto steelworks sufficiently to reduce its enormous emissions and environmental footprint – an exercise that would come at a huge cost. A member of the European Commission told Argus that the buyer will face potentially insurmountable challenges. As yet, the bidders’ plans for the site have remained largely secret, with only fragments of their plans made public so far.

Participating in heated discussion at Monday’s annual Confindustria Taranto meeting, president of Italian steel federation Federacciai, Antonio Gozzi, pointed to the 25-year modernisation of Austria’s Linz steel plant as an example of what could be achieved at Taranto, calling it a steelmaking Disneyland. But that might be more than a new owner would be willing to undertake – particularly since the Taranto steelworks is considerably larger than Linz. Gozzi added that Italy cannot afford to make its own version – without EU funding – and that “there are no entrepreneurs willing to do a Disneyland”.

It will be interesting to see how Ilva’s future owner handles its new acquisition, in an environment where scrutiny will be intense and – to paraphrase Gozzi – the rules of the game could dance around.

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