Ilva bosses had been set to close the mill after police nabbed recent steel products headed for market.
And the plant has been dogged by pollution complaints and reports of higher cancer rates nearby.
The company had got government permission to keep working while it ironed out the issues.
But bosses said the steel seizure would force them to close the Taranto mill immediately.
Police also arrested seven people, including company officials, on suspicion of bribing officials to play down health hazards.
Workers stormed the plant on Tuesday to protest against the planned closure.
The Fiom union has urged its 12,000 workers to keep working.
But, just when things seemed that they couldn't get worse, a freak tornado struck the unlucky plant on Wednesday.
One person was reported missing, some two dozen were injured and the plant sustained significant damage.