Three nodes to continue producing steel in Italy

ArcelorMittal goes away or stays?

In extraordinary administration since 2015, on 1 November 2018 Ilva officially becomes part of the giant ArcelorMittal, which won the tender and signed the final agreement with the then Minister of Economic Development Luigi Di Maio.

He enters through AM Investco Italy, a consortium participated for 94.4 percent by ArcelorMittal and for 5.6 percent by the Intesa Sanpaolo group (replaced after the release of Marcegaglia).

Formally it is a rental contract until the end of 2022, when the plants should be sold at the price set on the basis of the tender.

Now, however, the new owner has formally written that he wants to withdraw from the contract, citing as a reason the fact that the Parliament has canceled the extension of the so-called penal shield (ie the immunity of the managers during the execution of the environmental plan) from the extraordinary administration to ArcelorMittal.

The events of the penal shield have already been dealt with several times and I will not go back to it. Suffice it to say that in various versions it has been installed and removed four times over the last few years, thus damaging the credibility of the country. So much so that today's hypothesis, in an attempt to recover credit, is that of a more general shield, which covers all companies in similar conditions.

Beyond the criminal shield, nobody knows whether ArcelorMittal really wants to negotiate or has already decided to leave. It would be entirely rational for the steel multinational to remain in Italy, in light of the strong commitment deployed to win the race and conclude the final agreement with Di Maio, and considering that it has already spent 1.2 billion euros (of the 4, 2 planned by 2023), closed several other plants in Europe to buy Taranto and has just appointed a new managing director to restore the company.

Many think that Arcelor wants to retract the agreement because the steel crisis has occurred. In fact, it has put 1,300 people in redundancy a few months after taking over and produces 4 million tons per year instead of the 6 planned.

Many others, however, think that ArcelorMittal has already thrown in the towel, so much so that according to Moody's the group loses in the stock exchange because it is not clear if it will be able to get rid of Taranto.

The three issues to be addressed

Whether they have blatantly mistaken the accounts (or just as blatantly underestimated the situation in Taranto) and want to abandon both if they just want to deal, in their letter of withdrawal Mittal father and son raise three questions that anyone in the future wants to manage the plant should consider . And it should be considered even if the state were to manage the establishment, although the hypothesis appears particularly difficult both for the European rules, and for the difficulties of a decidedly competitive market like the iron and steel one (let us remember that Ilva loses millions of euros every day) , and because there are obvious public finance difficulties.

The first question indicated by the Mittals concerns the penal shield. In the withdrawal letter they write that they cannot work without it and that they no longer trust governments that change and shields that change accordingly. To put it back or not immediately became a question of negotiation: it is clear that it is confirmed only if the Mittals are willing to negotiate, but it is equally clear that anyone who wants to manage Ilva needs it, so it is only a matter of time. Meanwhile, what can be expected immediately is that, in the event of abandonment of Mittal, the plants will be left with all the safety measures in order and able to function. Because the penal shield does not only protect the owners, but also the simple executives who deal with the daily management.

The second issue concerns the seizure of the magistracy of the blast furnace number 2. After the tragic death of a worker in 2015, the oven was seized and for the release from seizure the judicial custodian imposed full automation. The Mittals maintain that, if this is the case, they will have to do the same operation also for the blast furnaces 1 and 4 (which are quite similar to 2), something very complicated in the short term and which prevents the production of 6 million tons envisaged in the industrial plan, because in the period necessary to automate it, the blast furnace remains stationary.

We must therefore understand if we really need to automate the ovens and, if so, if it is possible to reach 6 million tons. Maybe Mittal has miscalculated and now wants to retract the business plan, but it may also be true that with the ovens seized (and with the steel crisis clearly underestimated) it is difficult to increase production.

The last question is not about the verb "power", but the verb "to want": do you really want to increase production? In the letter, Mittal raises the issue of consent to Taranto. The time has come to decide: if we want to increase production, we must say it clearly. Personally, I believe that the benefits of maintaining the site, once the agreed environmental remediations have been made, definitely exceed the costs. What bodes well is that to sign the agreement with Mittal of 2018, which foresaw first 6 and then 8 million (from 2023) of tons of production, was the same Di Maio. And, on the other hand, the former Health Minister Giulia Grillo has certified that in Taranto today the air is cleaner than in Milan.

So let's deal with Mittal and put the penal shield back if the multinational company is willing to sit at the negotiating table. And if on that table there are on the one hand 4 million tons (Mittal, in fact) of production and on the other a path that leads to 6 million tons minimizing social costs, a compromise can be found.

* The opinions expressed in this article are personal and do not involve the institution to which they belong