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Italian prosecutor orders production halt at ArcelorMittal Italia's BF2

London — An Italian public prosecutor has ordered a production halt at ArcelorMittal Italia's blast furnace number 2, with 2 million mt/year production capacity. ArcelorMittal Italia said Wednesday that it is studying the court's notification, assessing technical aspects and hopes to keep the furnace open.

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ArcelorMittal Italia told S&P Platts in an emailed statement that it received notification Tuesday of an order from the Taranto Public Prosecutor Prosecutor to start the process to shut down blast furnace number 2 at its Taranto plant.

"Our intention is to collaborate as always with the relevant authorities and work towards an acceptable solution that will ensure the blast furnace can remain operational avoiding the risk of disruption," the company told Platts.

Blast furnace number 2 at the Taranto works has a design capacity of 2 million mt/year crude steel but is currently working with a production target of 1.5 million mt/year.

ArcelorMittal said the issue dates back to 29 July 2015, when, following a fatal accident, the Taranto public prosecutor ordered the seizure of the blast furnace.

It is understood that the decision has been taken by the Italian Public Prosecutor following the release of evidence from appointed technicians that the blast furnace number 2 does not comply with operational safety standards. The furnace was effectively seized by the Italian authorities in 2015, having operated since that time under a special accord between the Italian government, Ilva, the troubled former owner of the Taranto works, and Ilva's administrators, on the condition that improvements would be undertaken at the installation.

After it took over the plant last year, ArcelorMittal Italia attempted to gain full legal control of the blast furnace. However, during a preliminary hearing on this case this week the appointed technicians said that the company had not fulfilled the safety requirements and judges requested the furnace's total closure.

It is understood that on Tuesday ArcelorMittal representatives met the Italian government to discuss the problem as well as the 1,400 temporary layoffs planned at the site and the so-called Crescita law decree, under which the government wishes to cancel the steelmaker's criminal immunity regarding pollution remedies adopted at the site.

ArcelorMittal has already said that this new law "will make it impossible for the company to continue to operate," with some company representatives hinting at the idea that the company could now pull out from new investments if tensions continue with the Italian government.

When it purchased the former Ilva mill, ArcelorMittal agreed to invest over Eur1.15 bn ($1.28bn) to overhaul the operations and make them compliant with a 2017 environmental plan approved by the Italian government. In 2018, however, Italy's new government launched the Crescita Decree to stimulate Italy's economy and as part of the decree said it would remove immunity from ArcelorMittal for unlawful emissions. ArcelorMittal is currently renting the mill and could pull out of its investment if the issue is not resolved.

The Taranto works is currently Italy's biggest flat steel products producer.Due to depressed European steel demand and global steel overcapacity ArcelorMittal Italia has lowered its forecasted production for this year to 5 million mt crude steel from the original plan of 6 million mt, making 1,400 workers temporarily redundant. With the blast furnace number 2 close to a production shutdown, a further 1.5 million mt/year of output may be lost, which market sources believe may cut into ArcelorMittal Italia's economic sustainability.

-- Annalisa Villa, annalisa.villa@spglobal.com

-- Edited by Diana Kinch, diana.kinch@spglobal.com