Italy's ILVA said it may have to close Europe's biggest steel plant after judges ordered the seizure of steel and semi-finished products in a corruption probe that saw several managers arrested on Monday.
The move stepped up tension over one of the most sensitive industrial issues facing Prime Minister Mario Monti's technocrat government, involving some 20,000 jobs in an area already blighted by high unemployment and a stagnant economy.
Prosecutors ordered the arrest of seven people on suspicion of bribing officials to cover up a health and environmental scandal at the sprawling site in Taranto in southern Italy, where emissions of cancer-causing chemicals have been blamed for abnormally high cancer rates and respiratory diseases.
Justice system officials said the prosecutors arrested Emilio Riva, chairman of the group that owns ILVA, and six others including his son Fabio.
No comment was immediately available from the Riva group.
Officers from the Guardia di Finanza also impounded finished and semi-finished products intended for sale or transfer to other parts of the group, which also operates production sites around Genoa in north-western Italy.
The order covers steel produced at the plant since its furnaces were placed under special administration four months ago following accusations it was responsible for serious health problems in the region.
"I am not surprised this could force them to close the plant. Four months worth of cashflow would be lethal for any steel company right now," said one industry analyst, who declined to be named.
The group said it would appeal against the decision, which made it impossible to sell its products and would lead to the "immediate and unavoidable" closure of the Taranto factory and all other parts of the group which depended on it.
The arrests were the latest twist in a saga that has threatened the future of ILVA, a vast industrial site that employs 12,000 people directly and keeps another 8,000 in work in one of the largest industrial sites in southern Italy.
ILVA has been seen as a test case of the government's ability to protect Italy's heavy industry and preserve one of a shrinking number of major manufacturing employers in the poor and underdeveloped south.
Prosecutors suspect ILVA executives paid bribes to local politicians, officials and business people to hide the scale of the environmental disaster highlighted by a series of damning environmental reports.
Emissions from the plant have been blamed for abnormally high levels of tumours and respiratory diseases in the region, prompting protests from local people faced with a seeming choice between jobs and health.
The government last month gave ILVA authorization to continue operations on condition that it cut emissions and cleaned up the plant.
Metalworkers' unions called on Monti to act to save jobs and said the government had to "declare clearly whether it wants to save an industrial and employment centre which is essential to the country."
The closure would only affect the cold rolling area of the plant where steel is rolled into strips and plates and which was not already put under court administration by a court order in July that led to a stand-off between ILVA and magistrates.
ILVA said on Monday the plant fully conformed with safety regulations and denied its operations were in any way connected with any abnormal mortality levels.
The president of the factory, Bruno Ferrante, was also placed under investigation over the scandal.
"I have no intention of abandoning my position as president of ILVA. The accusations made against me by the Taranto prosecutors are without substance," he said.