[ferro-alloys.com]ArcelorMittal Italia workers will go on a one-day strike June 9 as unions rejected AM Italia's new post-COVID industrial plan presented to the Italian government June 5, union representatives told S&P Global Platts on June 8. According to the 2020-2025 plan seen by S&P Global Platts, crude steel production will be ramped up to 6 million mt a year by 2025 rather than 8 million mt/year, making 3,300 jobs redundant.

The 8 million mt/year target will be reconsidered in 2025 when demand presumably will have returned to pre-pandemic levels. The 6 million mt/year goal will be achieved using three blast furnaces (BF1, BF2, and BF4). At the moment AM Italia in Taranto is operating with only two of its four remaining blast furnaces (BF1 and BF4), producing around 7,500 mt/day of crude steel, with most of its cold mills temporarily shut down in the steelmaker's southern and northern sites.

As reported in the industrial plan, due to the COVID-19 crisis 2020 shipments will decrease from 5 million mt to 3.5 million mt as "the Italian lockdown resulted in a significant slowdown in shipments starting in March and continuing in Q2, while a partial recovery is expected from Q3."

In the document it is not clear if BF5 will be refurbished and restarted or not, or eventually replaced by a greener electric arc furnace. BF5 is the largest blast furnace in Europe with a production capacity of around 3.5 million/mt a year. It was idled in 2015.

The company also said that in order to deliver on its post-COVID business plan it requires a Eur600 million ($678 million) loan, as part of the state guarantee program, and a Eur600 million mortgage loan in 2022 after the finalization of the acquisition and a state aid-compliant Eur200 million indemnification for COVID-19 damages.

ArcelorMittal agreed to buy Ilva, Europe's biggest single-site steel firm, in 2018 under a lease-and-purchase agreement for Eur1.8 billion and to invest another Eur2.4 billion to clean up and modernize the plant, which has been dogged by environmental issues.

Sources said the loan requests are problematic considering the cut in production and jobs but also because ArcelorMittal has a clause that it can withdraw from the purchase. Following legal issues with the Italian state, ArcelorMittal in early March reached an accord with Italian authorities over the future of the former Ilva group, amending the existing lease and purchase agreement. The agreement left ArcelorMittal with the right to withdraw from its Ilva purchase by November 2020, subject to the payment of a fine of Eur500 million. The lease-and-purchase agreement may extend until May 2022.

Sources believe that the new industrial plan is so different from the previous one it suggests that ArcelorMittal is not willing to enter into a proper "constructive dialogue with the government, but is ready to leave the Italian asset, as it is too expensive to maintain and lossmaking," according to one.

Sources close to the Italian government said the government is divided between some who want ArcelorMittal to stay while others want a future for the former Ilva without ArcelorMittal.

Market sources confirmed the low demand for steel in Europe with expectations that a rebound will not happen before 2021. "Considering the market situation the Italian government should try to keep AM in Italy or, if not, I do hope they have a proper plan to avoid a second Alitalia," a senior industrial source said, referring to the perennially struggling Italian airline Alitalia.

ArcelorMittal when contacted by Platts declined to comment.

(S&P Global Platts)

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