Reuters: Bankruptcy News: Italian unions call for output pact to help troubled steelmakers

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Italian unions call for output pact to help troubled steelmakers Jun 28th 2013, 11:06 Fri Jun 28, 2013 7:06am EDT * Both companies under administration * Lucchini could supply slab to ILVA during plant clean-up * Commissioners have to verify whether tie-up is economical By Silvia Antonioli ROME, June 28 (Reuters) - Trade unions asked the Italian government this week to promote a production alliance between Italy's two largest steel producers, ILVA and Lucchini, to help the troubled firms stave off further declines. The Italian steel sector, the second largest in Europe after Germany, has been hard hit by a drop in demand that has been exacerbated by tough austerity policies. Its output contracted by more than 11 percent in May from a year before. "Only by pushing forward production integration among the largest Italian steel players can we think of getting out of this tough situation. No plant can save itself on its own," said Gianni Venturi, national coordinator for the steel sector at union CGIL FIOM. The government has put troubled producers ILVA and Lucchini under "special administration", a procedure designed to save large companies and avoid big job losses. Earlier this month, it appointed restructuring specialist Enrico Bondi as special commissioner to run ILVA and oversee a two-year cleanup of its plant in the southern Italian city of Taranto at the centre of an environmental scandal. Lucchini, Italy's second-largest producer, was placed under special administration late last year after being declared insolvent. Italy's top union bosses suggested in a meeting with industry and government officials this week that Lucchini should boost production in order to supply semi-finished products to ILVA's Taranto plant to fill the gap while the plant cuts production to carry out the clean-up. Lucchini's plant in Piombino, Tuscany, which is currently producing below its maximum capacity due to lack of funding, could produce steel slab to be re-rolled at the ILVA processing facility, the unions proposed. "Other European steelmakers are only waiting for the death of the Piombino and Taranto plant to steal their customers, but with this play we could maintain the Italian steel sector alive," Piombino-based FIOM union representative Mirko Lami said. State Secretary for economic development, Claudio De Vincenti, said the commissioners in charge of the two companies would have to determine whether such cooperation is possible. ILVA's production has fallen by about 25 percent since prosecutors ordered the partial closure of the plant a year ago following damning environmental reports. Many of its customers including its largest - steel manufacturer Marcegaglia - had to rely more on foreign suppliers to fill the gap. "From a technical point of view the unions' proposal could work, as Lucchini has supplied ILVA with slab in the past," Marcegaglia Chief Executive Antonio Marcegaglia said. "But they have to consider whether it is economically viable and whether the market conditions will require ILVA to push for a high production level," he said. Antonioli Gozzi, head of Italian steelmakers association Federacciai, echoed Marcegaglia's concerns. "I think developing production synergies between the Taranto and the Piombino plant is feasible only if it makes economic sense. I believe the two commissioners will talk to verify whether such an idea is plausible," Gozzi said. (editing by Jane Baird) Link this Share this Digg this Email Reprints

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