Kumba: Lower Steel Price Won't Help S Africa Manufacturing Much
28 Marzo 2011 - 1:50PM
Dow Jones News
A lower steel price won't significantly help manufacturers in
South Africa to increase output because steel accounts for only a
small part of their costs, Kumba Iron Ore Ltd. (KIO.JO) said
Monday.
Kumba has met and will be engaging further with the government
to discuss the role steel and iron ore pricing and output expansion
has on South Africa's economic growth.
South Africa's Department of Trade and Industry has said high
steel prices have hindered the country's manufacturing growth and
that low iron ore prices are important to keeping steel prices
down.
"Lowering the steel price by 10% or more is not going to have a
gigantic impact on output," said Robert Stillman of Charles River
Associates, who summarized the papers on behalf of Kumba Monday.
"Evidence from international studies shows that if you lower the
steel price by 10% it's unrealistic to expect an increase in
manufacturing output by much more than 2%."
In March 2010 a long-running deal to supply ore from Kumba's
Sishen mine to ArcelorMittal South Africa Ltd. (ACL.JO) at 3% above
the cost of production lapsed after the steel company failed to
renew mining rights on a stake in the mine by a government-imposed
deadline.
Kumba, a unit of Anglo American PLC (AAL.LN), said it expects to
resolve the pricing dispute with ArcelorMittal SA in early
2012.
-By Devon Maylie, Dow Jones Newswires; +44 (20) 7842 9483;
devon.maylie@dowjones.com
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