LONDON: ArcelorMittal`s bid to buy Italian steel major Ilva may have hit serious snags, but the European Union`s steel sector is set to benefit in the short term whether or not there is a deal.


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Italy`s Puglia and Taranto regions last week lodged a court appeal against the Italian government’s approval of ArcelorMittal`s environmental plan for its takeover of Ilva. If successful, it could scupper the deal and lead to the temporary shutdown of Europe`s largest steel plant.


Meanwhile, EU antitrust authorities have opened a full inquiry which is likely to see ArcelorMittal`s junior bid partner, Italian steel processor Marcegaglia, exit the deal to buy Ilva.


But a rally in European steel prices, which have soared by some 75 percent since the start of last year, is unlikely to be derailed by either outcome, steel industry participants told Reuters following the recent developments.


"It doesn`t change anything to have Marcegaglia out of the consortium," Tomasso Sandrini, chief executive of steel service centre S.Polo Lamiere, told Reuters.


With Marcegaglia holding just a 6 percent share in the partnership, it would have had a negligible influence on EU steel prices as it would in any case have been unable to co-ordinate its sales strategy with ArcelorMittal-Ilva, he said.


EU antitrust authorities in November upgraded their investigation into whether the proposed purchase of Ilva by the consortium led by ArcelorMittal, the world`s biggest steelmaker, will lead to steel price hikes.


A few weeks later, the Puglia and Taranto regions filed an appeal against the takeover that counter-intuitively put the EU steel sector in a win-win situation in the short term, investment bank Jefferies says.


"If the appeal is successful, Ilva may be at least temporarily shut down, removing 6 percent of Euro flat steel production and likely driving spot prices higher," it said.


On the other hand, a successful takeover of Ilva would improve the pricing power of EU steelmakers in the longer term by reducing the number of sellers in the market.


ArcelorMittal`s proposed takeover of Ilva comes as steel majors Tata Steel and Thyssenkrupp look to combine their European assets, meaning anti-trust authorities have to proceed with particular caution as regards the deals.


Already, ArcelorMittal has approached Italian steelmaker Arvedi, among others, about buying its mills in Piombino, Italy, an Arvedi spokesman told Reuters.


The Piombino mills make 800,000 tonnes per year of galvanised steel, used in the autos, white goods and construction sectors


Market concentration in the EU galvanised steel is of particular concern to authorities investigating the Ilva deal, sources say, with Marcegaglia a big player alongside ArcelorMittal and Ilva.


Berenberg said earlier this year that Ilva’s privatisation alone will see EU steel prices rise by 10-20 euro per tonne, while that of Tata-Thyssenkrupp will boost prices further still.


ArcelorMittal reached a 1.8-billion-euro ($2.1 billion) deal to buy Ilva in June, and plans to invest another 2.4 billion euros cleaning up and modernising a plant which has been dogged by charges of corruption and environmental crime for years.


In 2012, Italian authorities ruled emissions of dust and cancer-causing chemicals from the plant had caused deaths, tumours and respiratory disease. About half the plant`s annual 11 million tonne capacity was eventually mothballed.