Flacks Group plans 6 mil mt/year of steel capacity for Italy's ADI

Global investor Flacks Group's plan for national steelmaker Acciaierie d'Italia is for an annual production capacity of 6 million metric tons of steel with two electric arc furnaces and one blast furnace, Chairman Michael Flacks told S&P Global Energy Jan. 6.

The company, which specializes in the acquisition and operational turnaround of medium to large-sized distressed businesses, entered into exclusive negotiations with the special commissionaires in charge of the sale of ADI, formerly Ilva, last week, Flacks also told Platts, confirming Italian media reports.

"In Taranto, we are planning a combined production capacity of 2 million mt/year for each electric arc furnace, so in total 4 million mt via EAFs, and one blast furnace capable of covering approximately 2 mt/year of steel output," Flacks said.

"Maintaining one blast furnace, in our view, is absolutely necessary to preserve the capability to produce high-grade steel," he said. "Certain grades of deep-drawing steels for the automotive industry and most importantly, high-strength steels for energetics and natural gas pipes production or for shipbuilding, they can be difficult to produce using EAF technology."

"If we intend to fully utilize the performance potential of [hot strip mill no. 2] and the subsequent production of heavy plates and pipes production lines, it is essential to keep one blast furnace in operation," he said. "At the same time, this alternative also diversifies raw material risk and has strategic significance for maintaining steel production as a part of critical infrastructure."

The main raw materials for the EAFs will be direct-reduced iron and hot-briquetted iron, along with scrap, Flacks said, although a decision on where to source these materials has not been settled. However, ADI is in a strong position to secure DRI/HBI or scrap deliveries via ship since the plant is close to Taranto port, he said.

The original plan considered either the MIDREX technology (licensed by Kobe Steel) or ENERGIRON HYL (Tenova/Danieli technology). Both technologies utilize natural gas to reduce iron ore pellets and are "H₂-ready," meaning they enable the gradual substitution of natural gas with hydrogen, Flacks said.

In the first phase, Flacks said that the reducing gas would primarily be natural gas, which is readily available, whereas green hydrogen is not currently available in the necessary volumes and remains more of a future vision.

"The original plan sets a very ambitious goal. After 2035, the project aims to transition largely toward a hydrogen-based DRI process, which combined with green electricity could enable a around a 90%-95% reduction in CO₂ emissions compared with current levels," Flacks said. "In our view, given today's technical maturity and hydrogen production costs, this plan appears highly unrealistic."

The deal under discussion would involve the Italian government remaining a strategic partner with a 40% stake, while Flacks Group would have an option to acquire an additional 40% stake at a later stage, according to Flacks.

Flacks also plans to retain approximately 8,500 skilled workers, which he described as ADI's "biggest asset."

A spokesperson at ADI was not available to comment.