It is currently operating at roughly half of its peak production level of 11 million tonnes per year because of weak demand and chronic overcapacity in Europe.

The plant has been under special government administration since last year after its owners, the Riva family, were accused of failing to prevent toxic emissions including carcinogenic particles from spewing out across the town, contaminating local farm land and mussel beds off the coast.

A report published by the European Environment Agency on Tuesday named Ilva as one of the 30 worst industrial plants for pollution in Europe.

The European Commission last month gave Italy two months to outline how it intends to clean up the plant, which supplies steel products to the car and engineering industries and is vital to the blighted economy of southern Italy.     

Ilva confirmed yesterday that it had received a bid but refused to divulge details.

Sources said the offer from Luxemburg-based ArcelorMittal and Marcegaglia was a non-binding one and subject to a series of conditions, including a 30-day deadline for acceptance.

The time-limited move by Arcelor boss Lakshmi Mittal ups the pressure on other potential bidders, said to include another Italian group, Arvedi, to come forward.

Italian media have made ArcelorMittal the favourite to win any bidding war.
Indian steelmaker JSW also expressed initial interest in Ilva but, according to reports in India, the company has been put off by the potentially high environmental and pension liabilities associated with the plant.     

The cost of making Ilva compliant with the European Union's Industrial Emissions Directive has been estimated at 1.8 billion euros and who picks up that bill will be central to the takeover negotiations.

Several members of the Riva family and other Ilva managers were convicted between 2001 and 2007 on pollution-related charges but many of these were subsequently quashed on appeal under statute of limitations rules.     

Prosecutors in the various cases cited a local lung cancer rate running at 30 percent above the Italian average and blamed the plant for 400 premature deaths in the 1990s and first decade of this century.

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