S Africa Government To Investigate Kumba,Arcelor Interim Pact
22 Luglio 2010 - 6:37PM
Dow Jones News
South Africa's government plans to investigate an interim
resolution to what had become an increasingly antagonistic pricing
dispute between the country's largest steel producer and largest
iron ore supplier.
Critical issues arising from the dispute between ArcelorMittal
South Africa Ltd. (ACL.JO) and Kumba Iron Ore Ltd. (KIO.JO) remain
unresolved, the ministers of trade and industry, economic
development and mineral resources said in a joint statement. The
terms of supplying iron ore and steel products is in the national
interest, they said.
The companies said earlier Thursday that they had agreed an
interim price for the steelmaking ingredient from Kumba's Sishen
mine while arbitration continues.
Kumba, a unit of Anglo American PLC (AAL.LN), in March canceled
a long-running pact under which it supplied iron ore from its
primary mine to ArcelorMittal at 3% above costs. The steel producer
refused to pay market prices as demanded by Kumba, and the mining
company last week said it would halt supplies. ArcelorMittal
responded by saying it lay off workers, close its Saldanha steel
plant and reduce exports.
The interim pact will see ArcelorMittal pay a fixed price of $50
a metric ton for ore supplied to Saldanha on the coast and $70/ton
for ore delivered to its inland plants. The agreement will be
backdated to March and last through July 2011.
Government ministers said they would meet with the two companies
to ensure the settlement doesn't have a negative impact on steel
prices.
Iron ore prices have been buoyed by rising crude steel
production, driven in part by demand from China. Sishen produced
21.1 million tons of iron ore in the first six months of the
year.
Labor union Solidarity welcomed the interim agreement between
ArcelorMittal and Kumba, and urged the pair to concerted effort to
reach a final deal.
"Although the possibility of layoffs has been averted for now,
it is important that Kumba and ArcelorMittal now act in their
employees' best interest," said Jaco Kleynhans, spokesman for the
union.
The pricing agreement between the companies dates back to 2001
following the breakup of a former state company into a steel
producer and miner. At that time it was agreed Sishen, which now
supplies about two-thirds of ArcelorMittal's ore each year, would
sell 6.25 million tons at cost-plus-3%.
Kumba this year argued the pact was broken when ArcelorMittal
failed to renew its mining rights on a minority 21% stake in the
mine by a government imposed deadline last year. ArcelorMittal has
said it doesn't believe this was grounds to end the deal.
In a further twist, the government handed prospecting rights to
little-known Imperial Crown Trading 289 at the producing mine based
on the 21% stake it had taken from ArcelorMittal for not renewing
its own rights. Kumba in May initiated a court review of the
decision.
-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848;
robb.stewart@dowjones.com
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