* Up to 30,000 jobs at risk in Italy
* 28 mln tonnes at risk of shutdown in EU -analyst
* Steel crisis triggers nationalisation talks
By Maytaal Angel and Silvia Antonioli and Stephen Jewkes
LONDON/MILAN, Dec 6 Italy faces a deep crisis as
its biggest steel plants struggle for survival, putting it in
the forefront of a permanent decline in western Europe's steel
sector and increasing cost pressures on many of the region's
Producing crude steel in the European Union, where supply is
30 percent more than demand, has become too costly. Only the
most technologically and environmentally advanced plants are set
Italy's largest steel producers, ILVA and Lucchini, face
potential shutdowns, which could cost the country 25,000 to
30,000 direct and indirect jobs.
The future of Italy's largest stainless steel factory,
Acciai Speciali Terni, is also finely balanced as it is up for
sale. Many fear this might result in a break-up, production cuts
and job losses.
The broader industry predicament is so acute that the
country - Europe's second-largest steel producer after Germany -
risks becoming a steel importer.
Italy's steel chain accounts for about 4 percent of its GDP.
"There is a serious risk of losing integrated steel
production in our country. The impact on the Italian
infrastructure, construction and automotive sectors, which are
already suffering, would be terrible," said Gianni Venturi,
national steel co-ordinator for Italy's biggest union, FIOM
"Due to the steel demand collapse in Europe, the
multinationals are divesting their French, Italian, German
assets and moving to lower-cost countries."
Plant shutdowns inevitably create friction with European
governments, which face widespread protests about job losses and
the impact of austerity measures.
France's socialist government has lambasted ArcelorMittal
, the world's largest steel producer, and its owner
Lakshmi Mittal over its decision to shut two blast furnaces at
Producing crude steel at Florange, which supplied steel for
the Eiffel tower, is no longer economically viable,
DIFFERENT PROBLEMS, COMMON THREAT
Europe's biggest steel plant, Riva-group owned ILVA, faces
closure after judges ordered the seizure of its steel in a
corruption probe tied to a health and environmental scandal.
Antonio Gozzi, the head of Italian steelmakers association
Federacciai, said ILVA's shutdown would increase costs for local
manufacturers by up to 5 billion euros ($6.5 billion) a year,
pushing some companies towards bankruptcy.
Federacciai expects Italy's steel production to decline by
almost a third to 21 million to 22 million tonnes this year.
Italy would still have the Brescia hub making long steel
products, mainly used in construction, but it may have to import
flat steel, used in anything from cars to home appliances.
"For flat steel the future is very much uncertain. I
wouldn't want to be Fiat at the moment," Macquarie head of
commodities research Colin Hamilton said.
ILVA's problems stemmed from a lack of investment to upgrade
the heavily polluting plant.
"Plants such as the ThyssenKrupp one in Duisburg, (Germany)
or the Voestalpine one in Linz, (Austria), are very similar to
ILVA ... but have a much more sustainable environmental impact,"
said union chief Venturi.
Italy's second-largest producer, heavily indebted Lucchini,
is battling weak market conditions and preparing to temporarily
halt its main blast furnace in Piombino for the third time this
year due to poor orders.
Its owners have tried to sell the group for the past few
years without success.
Also a worry is the sale of the Terni Acciai Speciali plant.
Finnish producer Outokumpu was told by the European
Commission it must divest the Terni plant to avoid having an
anti-competitive market share.
"The Terni plant is a mixed bag. The equipment is good but
the location is so-so; it's oversized for the Italian market," a
stainless steel industry analyst said.
CURE BY CUTS
Job losses are a prime concern for the indebted Italian and
European governments, leading to talk of nationalisation in
France and Italy.
Late last week, the Italian government rushed through a
decree to keep the ILVA plant going, putting it at loggerheads
with the courts.
The French government meanwhile backed away from a threat to
nationalise the Florange steelworks after securing promises from
ArcelorMittal that it will invest.
Industry players say that, painful though it might be, plant
closures are necessary to help the European sector overall.
"I think it does not make sense to try and artificially
expand the lifetime of products for which there is no need or
restricted need," said Wolfgang Eder, chief executive of
Voestalpine and president of EU steel industry body Eurofer.
Consultants Wood Mackenzie said some 36 million tonnes of
steel capacity have been taken off-line in Europe since 2008,
while only 8 million tonnes have been closed permanently,
leaving 28 million tonnes idle.
"If it is not economic to operate (those plants) today, and
there seems little prospect of any improvement in demand, then
there's a threat hanging over all of that capacity, and over
those jobs," Wood Mackenzie analyst Patrick Cleary said.
Keeping plants idled is costly, and cash reserves built up
by European producers during the good years are fast withering.
Industry experts say outdated, high-cost or polluting plants
have limited options, given Europe's economic slump and the
increasing self-sufficiency of Asian markets.
"They're just cutting those at bottom of the pile. Without
those cuts, steel prices can't recover. For Europe the future
lies in high-quality, speciality steels," said Metal Bulletin
Research analyst Kashaan Kamal.
(Editing by Veronica Brown and Jane Baird)