Italy's Lucchini to halt steel furnace temporarily

LONDON Fri Nov 23, 2012 12:15pm EST

LONDON Nov 23 (Reuters) - Lucchini, Italy's second largest steel producer, will temporary shut down its Piombino blast furnace in December due to weak market conditions, the debt-burdened company said on Friday.

The Italian and European steel industry face a time of hardship due to declining demand and economic weakness.

"I can confirm that a temporary closure will take place due to market conditions. We make steel on order and given the current situation we have decided to halt the blast furnace," a spokesman for Lucchini said.

"In Italy we are not the only company planning to halt its furnace. We all know how difficult the situation is."

Piombino, Lucchini's main production site, can produce up to 2.5 million tonnes of steel every year. This compares with Italy's total production of 28.7 million tonnes in 2011.

Lucchini, owned by Russia's Severstal and Severstal's owner, Russian businessman Alexei Mordashov, is still discussing the length of the closure but a union source said the shutdown will likely last around 40 days.

This year Lucchini had already shut down the Piombino blast furnace in August and May for 2-3 weeks each time, but the next shutdown will last a bit longer, the company spokesman said.

It is still not clear whether the furnace closure might have an impact on any of the 3,000 people employed directly or indirectly by the plant, he added.

Severstal acquired Lucchini, previously owned by the family of the same name, in 2005, but has since sold a majority stake to Mordashov to facilitate the sale of the debt-burdened company to a third party.

A sale has proved extremely difficult in the context of falling steel prices and economic recession.

Lucchini's board has been looking at options to avoid bankruptcy and save jobs, including Italy's extraordinary administration procedures or a deal with creditors.

Last month Swiss industrial group Klesch expressed interest in acquiring the Italian steel producer but Italy's biggest trade union voiced doubt that the purchase would take place. (Reporting by Silvia Antonioli; Editing by Anthony Barker)

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