ArcelorMittal mulls buying Italian steelmaker Ilva

Ilva runs Europe's biggest steel plant in the southern Italian city of Taranto

 The world's biggest steel producer ArcelorMittal is among parties considering buying Italian steelmaker Ilva, depending on the cost of an environmental cleanup plan ordered by the government, several sources said on Monday.

Ilva, controlled by the Riva family, runs Europe's biggest steel plant in the southern Italian city of Taranto. But the maker of flat steel products used by carmakers, electrical appliance manufacturers and shipbuilders, has been at the centre of a lengthy controversy over pollution.

"In the last few days I learned that ArcelorMittal has shown an interest in buying Ilva," a source close to the situation, who asked not to be named, told Reuters.

The Riva family, Ilva, and ArcelorMittal all declined to comment.

An industry source who also did not want to be named said Chinese and Russian players, as well as Italian steel groups Marcegaglia and Arvedi, were interested in Ilva.

Arvedi declined to comment and Marcegaglia was not immediately available for comment.

Any eventual offer could be hindered by the cost of the plan ordered by the government to reduce pollution levels around the Taranto plant, estimated to reach around 3 billion euros, the sources said.

"Ilva is losing money so finding a solution for the plant has become more pressing. The problem is that it is hard to plan anything until there is more clarity on the environmental restructuring," the industry source said.

The Italian government put Ilva under special administration last year after prosecutors alleged that toxic emissions from the Taranto plant caused abnormally high rates of cancer and respiratory illnesses in the surrounding region. Several former executives were arrested.

The group denies its operations were responsible for any health problems.

Talk of an investment by ArcelorMittal into Ilva, which would give the Luxembourg-based giant greater control over the price of steel in southern Europe, first circulated a year ago and has resurfaced in the press in recent weeks.

But Colin Hamilton, the head of commodities research at investment bank Macquarie, said he was sceptical ArcelorMittal shareholders would back further investments following a November purchase of a ThyssenKrupp steel plant in the United States.

A source at Ilva said the Taranto plant was producing 20,000 tonne of steel a day, equivalent to about 7 million tonne per year. This compares with an output of 6.3 million tonne in 2013 and 8.3 million tonne in 2012.

In recent days, the company has proposed cutting the working hours for about 3,500 employees, constituting about a third of workers at the Taranto plant, as a means to save money.