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UPDATE 2-Italy's top court says production at Ilva plant can continue

(Adds govt, detail)

ROME, June 23 (Reuters) - Italy’s top administrative court on Wednesday ruled that production at the Ilva steel plant in the southern city of Taranto can continue.

The Council of State court said in a statement that the Taranto city order calling on the plant to be shut down due to high air pollution levels was illegitimate “in the absence of the conditions of necessity and urgency”.

The administrative judges added that the city order “overlapped the ways in which, ordinarily, situations of environmental pollution and health risk are managed”.

Lawyers for ArcelorMittal, which controls Ilva, had appealed the city order claiming a shutdown would have permanently damaged the facilities and put jobs at risk.

Taranto, in Italy’s underdeveloped south, hosts most of ILVA’s 10,700 Italian workers.

Once the largest steel producer in Europe, the factory emitted a lethal cocktail of carcinogenic dioxins and mineral particles for more than half a century, that doctors say has caused a surge in cancer rates in the adjacent city of Taranto.

The government took control in 2015 to safeguard jobs and reached a deal to sell the plant to ArcelorMittal in 2018.

However, this is being renegotiated, with the state likely to become the main shareholder as environmental concerns remain.

“The government will go ahead swiftly with an industrial plan that is environmentally compatible and respects people’s health,” Industry Minister Giancarlo Giorgetti said after the ruling.

Rome said in the past that big investments were needed to change coal-fired plants to gas-fired plants ready to work on hydrogen in the future.

The former owners of the Ilva steelworks, Fabio and Nicola Riva, were sentenced to 22 and 20 years in jail respectively for allowing it to spew out deadly pollution, by a separate court last month.

Reporting by Marco Carta, writing by Giselda Vagnoni, editing by Maria Pia Quaglia; editing by David Evans

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