It has been a long, tortuous road, but finally ArcelorMittal’s reported €2 billion purchase of Italy’s Ilva steel plant looks like it is nearing completion.
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The deal was largely contingent, according to a European Commission Press release, on an agreement between unions and the buyer over future employment at the plant.
Early and vocal opposition from unions was all around staffing levels with both rival bids. India’s JSW was the rival bidder at the time, indicating significant job cuts in order to address one of Ilva’s three key challenges.
According to union officials reported in the local press at the time, the Mittal-led consortium wanted to reduce staff numbers from 14,200 in 2016-2017 to 8,400 by 2023, while the rival bid would cut head count to 7,800 over the first year but then bring it back up to 10,300 by 2023.
The final deal agreed this month and announced on the company’s website states ArcelorMittal has committed to initially hire 10,700 workers based on its existing contractual terms of employment. In addition, between 2023 and 2025, ArcelorMittal has committed to hire any workers who remain under Ilva’s extraordinary administration (essentially, its nationalized current operating position).
Challenges Facing Ilva
Ilva faces three main challenges.
The first has been decades-long environmental breaches resulting in reported raised incidences of cancers and respiratory diseases in the area.
The second is probably a contributing factor to the first: endemic losses caused by uncompetitive staffing levels, overseas competition and underinvestment.
The third is the fact that Ilva is located in an area of high unemployment with scant opportunities for workers to find alternatives. If Ilva were to be closed, the impact on the region’s economy would be devastating. Yet, the plant requires massive investment to cut the environmental pollution and to improve efficiency if it is to have a future. ArcelorMittal has committed to invest some€4 billion, with €1.1 billion of the investment to go toward environmental cleanup, while €1.2 billion will go into production improvements.
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As Europe’s largest steel plant and, as such, a strategic source of employment in a depressed area, it was unlikely the plant would be allowed to close by the Italian government. A takeover was inevitable at some stage, but the buyer was always going to need deep pockets.
ArcelorMittal will make a better steward than many others and, at least, ensures a future for the plant.