/ 16 July 2010

Govt concerned about Kumba, ArcelorMittal dispute

The Department of Trade and Industry (DTI) is concerned about the lack of progress between Kumba Iron Ore and ArcelorMittal South Africa in achieving an interim pricing arrangement for iron ore.

In a statement on Friday, the department said that the dispute between two companies “should not escalate to the point that it risks imposing negative consequences on the economy”.

In particular, the current impasse should not lead to a situation where iron ore [which had previously been processed in the country] was exported in unbeneficiated form.

The dispute should also not be allowed to disrupt domestic steel production, or price domestic steel even further above the internationally uncompetitive levels that had prevailed prior to the dispute.

The department called on both parties “as a matter of urgency” to responsibly resolve the dispute in a manner that did not lead to negative economic consequences for the country.

Earlier, Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore, said in a separate statement it had failed to reach an agreement on interim iron-ore prices with ArcelorMittal South Africa.

Kumba said this was in spite of “extensive negotiations” over the past five months between the parties.

This followed a dispute resulting from ArcelorMittal South Africa’s failure to apply to convert its 21,4% right in the Sishen mine to a new-order mining right by April 30, which led Kumba to cancel a cheap iron-ore supply agreement with ArcelorMittal.

The matter is currently under arbitration.

Offer to mediate
The DTI repeated its offer on Friday to both parties to mediate on the matter.

“Notwithstanding the fact that this offer has not been taken up to date, it remains open to both parties.”

The DTI added that it would be assessing “all options available” to ensure that in the event of a failure of the parties to reach a responsible settlement, the economy did not suffer negative consequences.

Kumba has now demanded that ArcelorMittal South Africa pay for iron ore before it is delivered because the latter had dismissed options Kumba put forward to resolve the dispute.

The first option was that ArcelorMittal South Africa pay the difference between the old agreement and the market price into an escrow account.

The second option was that ArcelorMittal South Africa paid $50 a metric ton for ore supplied to its Saldanha plant on the coast and $80 a ton for ore supplied to its plants inland.

Both options were rejected by the steelmaker. – Sapa