Breaking News
Investing Pro 0
Free Webinar - Unlock Divergence Trading: Learn from Seth Julian MBA | TThursday, March 23, 2023 | 10:00AM PST Enroll Now

Explainer: ArcelorMittal's Italian venture runs into legal and financial woes

Stock Markets Nov 06, 2019 10:34AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

By Crispian Balmer

ROME (Reuters) - ArcelorMittal (AS:MT) said this week it was withdrawing from a deal to buy Italy's struggling steel firm Ilva after the government scrapped previous guarantees of legal immunity during an environmental clean-up at its plant.

The decision puts at risk thousands of jobs in Italy's underdeveloped south, threatens supply for Europe's second-largest steel consumer, and has led to ructions within the ruling coalition.

Here is an explanation of what has gone wrong and why the issue is so important for Italy.


Ilva was founded in 1905. Its biggest plant, and the largest in Europe, took root in the southern city of Taranto in the 1960s. At its peak, the site produced more than 10 million tonnes of steel a year, but following scandals over its appalling environmental record it was placed under state-supervised administration in 2015.

After months of negotiations, steel giant ArcelorMittal (AM) took control of Ilva in 2018. The firm currently has some 10,700 employees, with 8,200 in Taranto and most of the others in two finishing facilities in northern Italy.

Under the deal, AM agreed to pay 1.8 billion euros ($2 billion) for Ilva. It also pledged to spend 1.2 billion euros between 2018-23 on an environmental clean up and 1.3 billion to boost production at Taranto to 8 million tonnes per year from 6 million.


AM's main complaint is that the government has removed a pre-existing legal shield that granted it immunity from prosecution over environmental risks while it carried out the clean-up at Taranto.

The shield was introduced in 2015 when the state took charge and gave legal immunity to the then managers as well as to any future buyers while they implemented "the best preventative rules on environmental matters." 

Locals afflicted by pollution said this left them without legal redress and was therefore unlawful. A local judge backed their complaint and the ruling 5-Star Movement, which had promised to shutter Ilva before entering government in 2018, introduced a clause in a decree in June to remove the safeguard.

ArcelorMittal said if the decree was approved, it would pull out of the purchase and initially the government promised to backtrack. But, under pressure from 5-Star lawmakers, the promise failed to materialize and the shield expired on Nov. 3.


Experts say environmental norms were ignored at the site for decades, leaving Taranto exposed to highly toxic pollutants. One report drawn up by a group of medical experts found that between 2005 and 2012, more than 3,000 deaths were directly linked to exposure to pollutants. Locals say there have been hundreds more deaths since then. ArcelorMittal says it cannot run the risk of law suits tied to the pollution before it has had a chance to clear up the mess and make the site safe.


According to ArcelorMittal, yes. It says an order from a magistrate in July to idle one of three operational furnaces at Taranto following a fatal accident there in 2015 meant it could no longer implement its industrial plan. A court order in September annulled the July demand and gave AM 90 days to make the furnace comply with safety regulations. AM has said it needs more time to complete the desired overhaul.


No. Prime Minister Giuseppe Conte says immunity was not part of the purchase accord so cannot be used as a reason to rescind the deal. 5-Star says AM is seeking an excuse to flee Italy at a time of weakness in global steel markets. Ilva made an EBITDA loss of some $350 million in the first half of 2019.

AM has cut its output in Europe blaming weak demand and high imports. Critics say it would therefore be in the company's interests if Taranto was shuttered. AM denies this, saying it aimed to make Taranto the lowest cost site in Europe. 


If AM does pull out, the case will end in court. In the meantime, the government would have to take the site back and presumably seek a new buyer or nationalize it. The coalition would also face a huge political backlash.

Explainer: ArcelorMittal's Italian venture runs into legal and financial woes

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email