Pretoria - ArcelorMittal South Africa and its iron ore supplier Kumba have reached an interim arrangement in terms of a pricing agreement following a dispute that threatened the closure of Saldanha Steel.
Under the interim deal, mediated by Trade and Industry (dti) Minister Rob Davies, ArcelorMittal South Africa will now pay $50 a metric ton for iron ore delivered to its Saldanha plant and $70 per ton of iron ore delivered to its inland plants.
A tussle between the two giants began when Kumba cancelled a nine-year-old supply agreement under which ArcelorMittal South Africa bought iron ore at 3 percent above the cost of production. Kumba and ArcelorMittal South Africa became two separate companies derived from parent company Iscor when it was unbundled.
The world's biggest steel producer refused to commit to the new terms which included an increase in pricing and threatened to shut-down its Saldanha steel plant, a move that threatened 4 000 jobs.
However, late last night an interim supply agreement was reached, were it was agreed that
ArcelorMittal would continue to purchase the annual 6.25 million tonnes of iron ore under the standard payment terms, which is consistent with the disputed supply agreement.
There will also be no escalation in the prices agreed for the duration of the interim period, which commenced from 1 March 2010 and will expire on 31 July 2011.
ArcelorMittal CEO, Nonkululeko Nyembezi-Heita, said they were pleased with the agreement and they would continue with operations at Saldanha plant with the current employee complement.
"Our current export order programme will continue, but the viability thereof will depend largely on steel prices and exchange rate variations, which will be monitored on a continuous basis," said Nyembezi-Heita.
While welcoming the interim agreement, the dti said critical issues arising from the dispute remain unresolved.
"Government's view is that while the unbundling of Iscor took the form of a commercial contract between two private companies - a contract that is still in dispute - it also involved public developmental obligations."
The thrust of these obligations, the department said, was to ensure the viability and cost-competitiveness of local steel production, and to ensure a competitive steel pricing regime to support the development and deepening of value-added manufactured products in downstream industries.
The department said the industry was core in realising the Industrial Policy Action Plan and a shift to a new more labour-absorbing growth path and it was for this reason that it would continue to mediate in order to ensure that these outcomes are realised.
The department said the minister would meet with key stakeholders in the near future to assess the impact of the interim settlement on long-term developmental objectives.
They will then engage with the two companies to ensure that the settlement does not have a "negative impact on the steel price in the short run and that in the long run the rents arising from South Africa's mineral resources are used to develop the economy."-
