San Francisco Frontiers - Italy says Baku Steel submits 'best offer' for ex-Ilva plant

Adolfo Urso said Baku Steel was deemed to have made the "best offer" out of three bidders for the plant in the southern city of Taranto, one of Europe's largest steelworks, which has struggled for years.

The offer by Baku Steel, backed by the state-owned Azerbaijan Investment Company, was up against those from India's Jindal Steel and US holding company Bedrock Industries.

State commissioners will on Thursday "send a formal request to be authorised to negotiate with the international entity that has made the best proposal, which will most likely be that of the Azerbaijani team", Urso said.

"Thus opens a new and decisive phase of negotiations," he added.

The amount of the offer from Baku Steel has not been disclosed.

Prime Minister Giorgia Meloni's government placed the plant under state administration in February 2024 in a bid to protect its thousands of employees after it was declared insolvent by a Milan court.

Rome, which at the time had a 38 percent stake, had accused ArcelorMittal -- which had held the other 62 percent -- of refusing to inject new funds.

The steelworks, which dates from the 1960s, has been dogged by legal and political battles since 2012 over its emissions, and its production has been declining.

ArcelorMittal paid 1.8 billion euros ($2 billion) for it in 2017, promising to invest 2.4 billion euros and safeguard jobs at the plant, which has 8,100 employees in Taranto.

But when the Italian government intervened, it had debts of more than three billion euros and was unable to pay most of its suppliers or its utility bills.

- Industry in crisis -

The change in leadership comes at a crucial time for the steelworks, as the 25 percent tariffs imposed by US President Donald Trump on steel imports into the United States threaten to cripple a sector already in crisis.

Against a backdrop of rising energy prices and declining demand for steel, less than three million tonnes of steel were produced in 2023 in Taranto and barely two million tonnes in 2024.

Only two of the four blast furnaces are currently in operation.

Baku Steel currently operates a steel plant in Baku, the capital of Azerbaijan, with a production capacity of 800,000 tonnes per year.

It has committed to bringing a floating regasification unit to the port of Taranto, which was likely a deciding factor in its successful bid, despite environmental concerns.

Azerbaijan has become Italy's second-largest gas supplier after Algeria, following Rome's efforts to reduce its dependence on Russia after the invasion of Ukraine.

- Minority government stake -

Three candidates bid in January to take over the entire steelworks, while seven other offers related to the acquisition of certain assets.

Opposition parties criticised Meloni's hard-right government as soon as Baku Steel emerged as the favourite in early February.

"The government of patriots has decided to tie itself hand and foot at a strategic level to a state, Azerbaijan, which is deeply influenced by Russia," said Mario Turco, vice-president of the Five Star Movement.

Russia and Azerbaijan have been historically close but relations have soured since an Azerbaijan Airlines plane crashed in Kazakhstan in December, killing 38 people. Baku says it was shot at by Russian air defences.

Industry minister Urso indicated in early March that the Italian state could retain a minority stake in the steelworks.

Such participation "would allow us to better guarantee the industrial development" of the plant, "avoiding the mistakes of the past", he said.

The buyer will have to adhere to strict specifications, including "the complete decarbonisation of the Taranto steelworks", maintaining employment levels and making "the necessary technological and financial investments", Urso said then.

X.Roberts--SFF