EC conditionally approves ArcelorMittal’s acquisition of Ilva

The European Commission (EC) said on Monday May 7 it has conditionally approved the acquisition of Italian steel producer Ilva by ArcelorMittal, the world’s largest steelmaker.

The decision is dependent on the divestiture of an extensive remedy package proposed by ArcelorMittal to preserve effective competition in the European steel market, according to the EC.

“Today’s decision makes sure that ArcelorMittal’s acquisition of Ilva – creating by far the largest steelmaker in Europe – does not result in higher steel prices at the expense of European industries, the millions of people they employ and consumers,” said Margrethe Vestager, European Commissioner in charge of competition policy.

“ArcelorMittal has proposed to sell a number of steel plants throughout Europe to one or more buyers, who will run them to compete with ArcelorMittal on a lasting basis. This will preserve effective competition in European steel markets. It goes hand in hand with decisive EU action to protect our steel industry from unfair trade distortions from third countries,” Vestager said.

Last month, ArcelorMittal had proposed to the EC a plan to sell off a raft of its European flat steelmaking assets to seal its acquisition of Ilva.

During its investigation into the proposed acquisition, the EC expressed concerns that the sale of Ilva to ArcelorMittal would have resulted in higher prices for European customers for hot-rolled (HRC), cold-rolled coil (CRC) and hot-dipped galvanized (HDG) coil. The merged entity would have controlled more than 40% of the production capacity for HRC, CRC and HDG, with a far larger market share than any of its competitors in Europe.

Metal Bulletin’s price assessment for domestic HRC in Southern Europe was €520-560 ($622-670) per tonne ex-works on May 2. The assessment for similar domestic material in Northern Europe was €560-580 per tonne ex-works.

The EC also found that imported coil products are not a sufficiently strong and stable alternative to fully offset the likely negative effects on price due to the loss of competition between Ilva and ArcelorMittal.

As a result, the parties involved in the deal proposed a list of remedies to EU anti-trust authorities.

In particular, ArcelorMittal offered to divest a number of its assets: the Liège mill in Belgium; the Ostrava plant in the Czech Republic; the Dudelange mill in Luxembourg; the Piombino line in Italy; the Galati plant in Romania; and the Skopje mills in the Republic of Macedonia. Furthermore, ArcelorMittal offered to divest a number of distribution assets in France and Italy.

The sale of the HRC production capacities of ArcelorMittal Ostrava and Galati covers a significant part of the overlap created by the addition of the Ilva facility in Taranto to ArcelorMittal’s portfolio.

With regard to CRC and HDG, the divested assets cover the parties’ overlap in production capacity, the EC said.

Finally, ArcelorMittal proposed to remove Italian re-roller Marcegaglia – a significant Italian competitor for the production of galvanized flat carbon steel – from the consortium purchasing Ilva and committed not to acquire shares in Marcegaglia as part of the transaction.

AM Investco, which comprised global steelmaker ArcelorMittal and Italian re-roller Marcegaglia, agreed to purchase Ilva in May 2017. Rumors that Marcegaglia might be excluded from the Ilva deal have been circulating through the market since last December.

The EC concluded that “the proposed transaction, as modified by the commitments, would no longer raise competition concerns and would ensure that competition is preserved in European steel markets, in the interest of European manufacturing industries and consumers. The decision is conditional on full compliance with the commitments.”