2002/117/EC,ECSC: Commission Decision of 3 July 2001 on the State aid which Italy is planning to implement for Ilva Lamiere e Tubi Srl (Text with EEA relevance) (notified under document number C(2001) 1848)
Date: 2001-07-03
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, environmental protection, investment aid, iron and steel industry

L 43/22

EN

Official Journal of the European Communities

14.2.2002

COMMISSION

COMMISSION DECISION

of 3 July 2001

on the State aid which Italy is planning to implement for Ilva Lamiere e Tubi Srl

(notified under document number C(2001) 1848)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2002/117/EC, ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

Having regard to the Treaty establishing the European Coal and
Steel Community, and in particular Article 4(c) thereof,

Having regard to Commission Decision No 2496/96/ECSC of
18 December 1996 establishing Community rules for State aid
to the steel industry (1), and in particular Article 6(5) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2) and having regard to
their comments,

Whereas:

I. PROCEDURE

(1)

By letters dated 20 November 1997, 3 March 1998 and
the Italian authorities notified the
12 June 1998,
Commission,
in accordance with Article 6(1) of
Commission Decision No 2496/96/ECSC (hereinafter
referred to as ‘the Steel Aid Code’), that they intended to
grant environmental aid to two steel companies: Ilva
Lamiere e Tubi Srl (hereinafter ‘ILT’) (aid registered as
N 126/98) and Siderumbra SpA (aid registered as
N 341/98). They also notified, under Article 88(3) of
the EC Treaty, aid for investment (registered as N 125/
98) in ILT's tube-making facilities under Law No 488/92
of 19 December 1992 (3). The Italian authorities subse-

(1) OJ L 338, 28.12.1996, p. 42.
(2) OJ C 332, 20.11.1999, p. 9, and OJ C 315, 4.11.2000, p. 7.
(3) The law contained the ‘organic framework for extraordinary aid to
the Mezzogiorno and standards for subsidising production activities’.

further

supplied

information which

quently
the
Commission had requested in order to be able to estab-
the projects notified complied with the
lish that all
requirements for state aid to the steel industry laid down
in the Steel Aid Code.

(2)

(3)

(4)

the Commission
By letter dated 26 March 1999,
informed the Italian Government of
its decision to
initiate proceedings under Article 6(5) of the Steel Aid
Code (aid C 19/99) in cases ex N 125/98, ex N 126/98
(ILT) and ex N 341/98 (Siderumbra SpA) and invited it
to submit its comments. This decision was published in
the Official Journal of the European Communities (4). The
Commission invited interested parties to submit their
comments on the aid.

The Commission received comments from the United
Kingdom. It forwarded them to Italy, which was given
the opportunity to react; its comments were received by
in which the Italian
letter dated 14 January 2000,
authorities informed the Commission that they were
withdrawing the notifications relating to aid measures ex
N 126/98 (ILT) and 341/98 (Siderumbra SpA) and that,
accordingly, those measures were not going to be imple-
mented.

By letter dated 17 August 2000,
the Commission
informed Italy that it had decided to initiate the proce-
dure laid down in Article 88(2) of the EC Treaty in
respect of aid measure ex N 125/1998 in favour of ILT.
This decision was published in the Official Journal of the
European Communities (5). The Commission invited inter-
ested parties to submit their comments on the aid.

(4) OJ C 332, 20.11.1999, p. 9.
(5) OJ C 315, 4.11.2000, p. 7.

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The Commission received comments from the German
Association of Steel Tube Producers (Wirtschaftsvereini-
gung Stahlrohre) and from the United Kingdom Steel
Association. It forwarded them to Italy, which was given
the opportunity to react; its comments were received by
letter dated 15 January 2001.

it should allow for the fact that the large welded steel
tube sector suffers from structural overcapacity and that
such aid would therefore distort competition within the
Community.

(5)

(6)

(7)

II. DETAILED DESCRIPTION OF THE AID

ILT is based in Taranto and belongs to the Riva group,
which is one of the main steel producers in the Euro-
pean Union. On the same site it manufactures both steel
products covered by the ECSC Treaty, primarily hot-
rolled plate or sheet, and Community steel products,
primarily tubes. ILT has four hot-rolling installations for
tube-making (two installations for longitudinal-welded
large-diameter welded tubes (TUL/1 and TUL/2), one
installation for
tubes
(ERW), one installation for spiral-welded large welded
tubes (TUE)) and six coating installations for tubes.

electric-welded small-diameter

towards

Following the partial withdrawal of
the notification
referred to in recital 3, the aid subject to assessment in
the present decision consists of a subsidy of ITL 7 707
million (EUR 3,98 million)
investment of
ITL 14 105 million (EUR 7,28 million) by ILT for the
modernisation of its welded tube production facilities. It
will be granted by the Ministry of Industry under Law
No 488/92 for aid in depressed areas. The aid represents
37,46 % net grant equivalent (nge) of the eligible costs.
The investments cover a number of measures involving
all
the tube makers and the tube-coating plant at
Taranto and are aimed at improving the environmental
conditions in the production process and modernising
the plant so as to improve productivity (see annex for
details).

(8) Welded steel tubes are made from steel coils or plates
Intra-

(ECSC products)
Community trade in steel tubes is intense.

that are bent

then welded.

(9)

In its decision to initiate proceedings under the EC
Treaty,
the Commission expressed doubts as to the
effects of the investments on ILT's production capacities
since the Italian authorities had not provided either
details of ILT's existing capacities or details regarding the
investments.

III. COMMENTS FROM INTERESTED PARTIES

(10)

By letter dated 4 December 2000, the United Kingdom
Steel Association stated that the aid would have to be
assessed under the rules of the ECSC Treaty and thus
prohibited, as they do not permit
the granting of
regional aid. It also pointed out that, if the Commission
were to assess the aid under the terms of the EC Treaty,

(11)

By letter dated 15 November 2000, Wirtschaftsvereini-
gung Stahlrohre noted that there was a huge structural
overcapacity in the market for welded tubes which gave
rise to fierce competition: the capacity utilisation rate for
medium and small welded steel tubes remained at about
59 % in the period 1992-2000 while the capacity utilisa-
tion rate for large welded tubes was around 44 % during
the same period. Under these circumstances, the aid
should not be allowed.

IV. COMMENTS FROM ITALY

(12)

The Italian authorities stated in their letter of 12 October
2000 that the risk of the aid being diverted to ILT's
ECSC activities was non-existent, firstly because of the
extremely rigorous statutory controls, checks and verifi-
cations before aid can be granted and, secondly, because,
the
once the investment programme is complete,
Ministry of
invoices and
Industry checks individual
accounts as well as the consistency of the programme
and the identification particulars of plant, machinery and
equipment.

(13) As for the Commission's argument based on the overall
improvement of ILT's financial situation as a result of
the aid, the Italian authorities submit that it is entirely
independent of the keeping of separate accounts and
that ILT's situation is no different in this respect from
that of another firm, Gröditzer Stahlwerke (see recital
17). Moreover, the commitment made by ILT that, if the
aid is granted, it will allocate capital and reserves to a
special capital and reserves provision (fondo del patri-
monio netto) for the entire duration of the programme
means
the available funds deriving from the
management of the company for ECSC activities remain
unchanged.

that

(14) As for the Commission's doubts as to the effects of the
investments on production capacities for large welded
steel tubes, the Italian authorities insist that they will
remain unchanged at 800 000 tonnes/year (250 000
tonnes for TUL/1 tubes and 550 000 tonnes for TUL/2
tubes) since none of the investments has an influence on
the essential part of ILT's production process for tubes
(the forming press for large longitudinal-welded tubes
and the bending machine for
small-diameter ERW
tubes). The
Italian authorities provided a detailed
description of the investments, insisting that those more
directly linked to the production process primarily
concern automation and mechanisation.

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14.2.2002

(15)

that

the Italian authorities recall

the firm is
Finally,
located in a region (Apulia) covered by Article 87(3)(a)
of the EC Treaty, with a maximum of 40 % nge for
regional aid. The aided investment will bring economic
and social benefits to the region by preserving jobs and
potentially helping the local economy through the devel-
opment of related activities.

(16) As to the comments made by third parties, the Italian
authorities pointed out in their letter of 27 February
2001 that the market for large welded tubes was a world
market linked closely to international economic develop-
ments and, most importantly, to the price of oil. The
extreme uncertainty of the oil market means that, at
times, established production capacity is insufficient to
cope with the demand stemming from investment
projects in plant for gas and other pipelines, while at
other times of market crisis, when oil prices are particu-
larly low, this type of investment is drastically reduced,
resulting in overcapacity. The Italian authorities consider
that the capacity figures provided by the Wirtschaftsver-
einigung Stahlrohre are purely abstract and theoretical
and do not take account of the modification of produc-
tion cycles required to produce tubes with the specific
technical and qualitative characteristics appropriate to
their final use. Italy submits here that the average utilisa-
tion rate given by the German authorities (40 %) would
be completely incompatible with the sound financial
management of a firm in a western economy.

V. ASSESSMENT OF THE AID

to that Treaty,

(17) Although ILT is an ‘undertaking’ within the meaning of
Article 80 of the ECSC Treaty because it manufactures
the
products referred to in Annex I
Commission has accepted that the EC Treaty may apply
to aid to non-ECSC activities carried on by an ECSC
undertaking, provided that they are clearly distinct from
In this
the
connection, the Court of First Instance has ruled that the
application of the ECSC Treaty to aid for investments
relating to the non-ECSC activities of an ECSC company
could not be justified unless in the absence of sufficient
guarantees to ensure that the aid would not be misap-
propriated to benefit production activities covered by
the ECSC Treaty (7).

same undertaking's ECSC activities (6).

(6) Commission Decision 1999/720/EC, ECSC of 8 July 1999 on State
aid granted by Germany to Gröditzer Stahlwerke GmbH and its
subsidiary Burg GmbH (OJ L 292, 13.11.1999, p. 27, recital 33)
and Commission Decision of 28 March 2001 on the State aid
which Italy is planning to implement for Ferriere Nord SpA (noti-
fied under number C(2001) 1010, not yet published).

(7) Unofficial translation: Judgment of 5 June 2001 in Case T-6/99 ESF
Elbe — Stahlwerke Feralpi GmbH v Commission, point 125 (not
yet published in the ECR).

(18)

Steel tubes are products which fall outside the scope of
Annex I to the ECSC Treaty.

(19)

In the present case, the Commission notes that, although
ILT is a single company which does not keep separate
accounts for its various activities, the aided investments
relate to specific installations which are clearly identified
and physically distinct from the rest of the installations
dedicated to the production of ECSC products. The
products manufactured in these installations are down-
stream of the ECSC products and belong to clearly sepa-
rate product markets.

(20) Under these circumstances,

in line with the decisions
already adopted by it (see recital 17) (8), the Commission
considers that there is no risk that the aid will benefit
ILT's ECSC activities. The EC Treaty thus applies in the
case in point.

(21)

(22)

The non-repayable grant at issue constitutes State aid
within the meaning of Article 88(1) of the EC Treaty
since it strengthens ILT's position compared to other
undertakings competing in intra-Community trade. As
for its compatibility with the common market,
the
following considerations apply.

The aid is granted under a scheme approved by the
Commission (9) and, with one exception (feasibility study
for the reinforcement of the O-press (TUL/2), see recital
25), complies with it as regards the purpose of the
investments (modernisation) (10), the eligibility of costs
(land, buildings, machinery and installations) and the aid
intensity (40 % nge).

(23) However, since part of the investment relates to the
large welded steel tubes subsector, the framework for
certain sectors not covered by the ECSC Treaty (11)
requires prior notification. As stated in the decision
initiating proceedings under the EC Treaty in the present
case, the Commission, in assessing individual cases noti-
fied to it under that framework, takes into account the
market situation in the subsector in which the under-
taking is active,
in particular whether or not there is
structural overcapacity. After identifying the situation of
the market where the company is active, the Commis-
sion assesses any effect the aided investment may have
on that situation or on competition.

(8) See footnote 6.
(9) Letter of 30 June 1997 (ref. SG(97) D/4949) relating to State aid

N 27/A/97.

(10) Modernisation is defined in Law No 488/92 as an initiative aimed
at bringing innovation to the firm in order to achieve an increase
in productivity and/or an improvement in the environmental condi-
tions connected with the production processes.

(11) OJ C 320, 13.12.1988, point 4.1(a).

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the aid in question, to be granted to the undertaking
does not exceed EUR 100 000.

VI. CONCLUSION

(28) Accordingly,

aid

the

State

amounting

to
ITL 7 652 360 000 that Italy intends to grant to ILT
under Law No 448/92 is compatible with the common
market. The aid amounting to ITL 54 640 000 that Italy
intends to grant to ILT for carrying out a feasibility
the O-press can be
study for the reinforcement of
considered de minimis aid if it meets the conditions laid
down in Commission Regulation (EC) No 69/2001,

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Italy is planning to implement for Ilva
Lamiere e Tubi Srl amounting to ITL 7 652 360 000 is
compatible with the common market under Article 87(3)(a) of
the EC Treaty.

Article 2

The State aid which Italy is planning to implement for Ilva
Lamiere e Tubi Srl towards the feasibility study for the rein-
forcement of the O-press amounting to ITL 54 640 000 does
not constitute State aid within the meaning of Article 87(1) of
the EC Treaty provided that it meets the conditions laid down
in Regulation (EC) No 69/2001.

Italy shall ensure that the abovementioned conditions are met.

Article 3

The proceedings initiated on 26 March 1999 under Article 6(5)
of Commission Decision No 2496/96/ECSC concerning aid
C 19/99 are hereby terminated.

This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 3 July 2001.

For the Commission

Mario MONTI

Member of the Commission

(24)

The Commission notes that continued production over-
capacity has existed in the steel tube sector since the
mid-80s. It also acknowledges that authorising aid for
companies operating in sectors characterised by struc-
tural overcapacity poses particular risks of distortion of
competition and so, where the aided investment entails
an expansion in capacity, it will require a reduction in
the intensity of the aid in order to offset its negative
effects on competition (see, for instance, the multisec-
toral framework on regional aid for large investment
projects) (12). Having examined the information provided
by the Italian authorities in their letter of 27 February
2001, the Commission notes that the investments bene-
fiting from the aid do not entail increases in capacities.
it notes that ILT is located in a
On the other hand,
region covered by Article 87(3)(a) of the Treaty and that
the aid is granted under an approved scheme. Accord-
ingly, the Commission considers that the negative effects
on competition of the aid in question are offset by the
benefits to the region.

(25) As regards the aid of ITL 54 640 000 (EUR 28 219)
towards the study for the reinforcement of the O-press,
Italy claims that the feasibility studies are considered by
to be eligible costs under Circular 38522 of 15
it
December 1995,
issued in accordance with Law No
488/1992, which was approved by the Commission (see
recital 22).

(26)

that

The Commission notes, however,
this Circular
considers economic feasibility and environmental impact
studies to be eligible, to the extent of 3 % of the total
eligible investment. In the present case, since reinforce-
ment of the O-press has not been considered eligible, the
feasibility study cannot be considered eligible either.
Therefore, aid towards these costs has to be considered
as ad hoc aid which, however, cannot be approved
under the Commission communication on regional aid
systems (13) because a study does not on its own consti-
tute investment in fixed assets within the meaning of
that communication.

(27) Notwithstanding recital 26, in view of the small amount
of the aid, it is covered by Commission Regulation (EC)
No 69/2001 of 12 January 2001 on the application of
Articles 87 and 88 of the EC Treaty to de minimis aid (14).
It does not therefore constitute State aid within the
meaning of Article 87(1) of the EC Treaty provided that,
for a three-year period, the total de minimis aid, including

(12) OJ C 107, 7.4.1998, p. 7.
(13) OJ C 31, 3.2.1979, p. 9.
(14) OJ L 10, 13.1.2001, p. 30.

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ANNEX

List of investments benefiting from the aid

Improvement of the dust recovery system, coating line No 3

Elimination of vibrations due to grinding operations

Fireproofing systems in the painting area, coating line No 3

Hydraulic stainless piping (TUL/2)

Replacement of hydraulic handling by electro-mechanical handling

Construction of 11 fume collection openings (TUL/2)

Renewal of information system (TUL/2)

Automation of the weighing machine and end-facer

Washing and cleaning of tubes (TUL/1)

Study for the reinforcement of the O-press (TUL/2)

Automation of tube handling and sorting (TUL/1 and TUL/2)

Preliminary internal examination with TV camera

Improvement of information system (ERW tube maker and coating line)

10 kW power source for ERW coating line

Automation of the external sandblasting area, coating line No 3

Tube-handling facilities

Welding heads (TUL/1)

Cutting of strips (TUL/2)

Adjustment of helicoidal tube maker operation

Installation for the regeneration of polyethylene

Adjustment of coating installation No 2 for FBE coating

Relocation of edging machine for coils (ERW coating line)

Coil head/end shearing (ERW coating line)

Optimisation cut-off (ERW coating line)

Replacement of the cut-off system (ERW coating line)

ITL
(milion)

ITL
(milion)

129

134

850

1 300

850

1 000

2 073

400

500

100

600

592

200

800

300

700

97

416

256

150

1 808

500

100

50

200

66 623

69 205

438 988

671 394

438 988

516 457

1 070 615

206 583

258 228

51 646

309 874

305 742

103 291

413 166

154 937

361 520

50 096

214 846

132 213

77 469

933 754

258 228

51 646

25 823

103 291

Total

14 105

7 284 625