Market sceptical on steelmaker Ilva sale

The proposed sale of troubled Italian steelmaker Ilva could be in doubt as negotiations between the government and buying consortium ArcelorMittal-led AM Investco show little sign of progress.

"The situation is very dramatic. There is a real possibility for Ilva to shut down, as buyers are not placing orders, because they are afraid that the mill is running low on money," a market participant said.

Ilva has been operating at around 50pc of its nameplate capacity of late, and many buyers have scaled back their purchasing. ArcelorMittal had been offering Ilva coil into the UK around one or two months ago, but the offer had disappeared since, a mill representative said.

Ilva's offers are currently some of the lowest in the southern and northwestern European markets for hot-rolled coils (HRC), but customers are not confident that the steelmaker will be able to fulfil orders.

The latest import offers from India to Italy were heard at €555/t cfr, while another Italian mill's prices are around €530-540/t ex-works. Ilva was said to be around €525/t ex-works.

The prospect of the deal falling through could spark a great deal of uncertainty, a buyer in the Benelux said, especially for the facilities that ArcelorMittal has agreed to sell in response to competition concerns that the European Commission raised over the acquisition.

The Italian government approved the takeover of Ilva by AM Investco in June 2017, but negotiations have seemingly failed to advance much since Italy's new coalition government came to power in June. The sale was expected to be finalised by the end of June, but the government extended its management over the steelmaker until 15 September.

Economic development minister Luigi Di Maio has said on several occasions that ArcelorMittal needed to improve its industrial and social plans for the acquisition to go ahead.

Di Maio also referred the bidding process for Ilva to Italian anti-corruption body ANAC, which said there was insufficient evidence to take the case on. But Di Maio said on 24 July that he was starting a 30-day "administrative procedure", which could culminate in the possible cancellation of the sale.

After a meeting earlier this week between the company and interested stakeholders, ArcelorMittal said it had made its "best and final" proposal for Ilva.

"The proposal of the Mittal Group summarises the hard work done with all the relevant stakeholders and represent at least a good starting point," said an official from the city of Taranto, where Ilva's major steelmaking plant is located.

A representative for Ilva refused to comment on the sale, as did ArcelorMittal, while the Italian economic development ministry failed to respond.