24th February 2011
By: Loni Prinsloo
Trade and Industry Minister Rob Davies said on Thursday that companies that benefited from discounted iron-ore prices would have to pass on the discount to customers.
He said that at least 21,4% of iron-ore output from Kumba Iron Ore’s (Kumba) Sishen mine should be made available at cost plus 3% to support a cost effective steel manufacturing industry in the country.
The Minister added that excessive steel pricing in South Africa in the past had disadvantaged the downstream manufacturing industries. This comes at a time when government has made its mandate of job creation and increasing local production capacity clear.
South Africa’s largest steelmaker, ArcelorMittal South Africa (Mittal), had been receiving the benefit of discounted iron-ore prices for years, but had not been passing on this advantage to downstream consumers.
This bruised the relationship between the Department of Trade and Industry (DTI) and the steel company as the group's access to South African-mined iron-ore on favourable terms had been effectively secured for it by government in 2001, on the provison that the company extended a so-called "developmental" price to South African consumers.
The iron-ore arrangement and the pricing promise had been central to the unbundling deal that led to the creation of separate steel and mining companies from what had previously been the Iscor group.
But the steel group clung to its policy of pricing steel on an import parity basis, later converting to a benchmarked pricing model, which led to a breakdown of trust between the DTI and Mittal.
Last year, Mittal lost its 21,4% Sishen mining right after failing to convert its stake into a new-order mining right as required by South African law.
Kumba’s Sishen Iron Ore Company applied for the mining right, but instead, a prospecting right was granted to Imperial Crown Trading (ICT). However, Kumba has now taken the matter to court as it believed that the granting of ICT’s prospecting licence was unlawful.
Nevertheless, Davies said that whoever took hold of South African resources in the future, had to take on the responsibility of looking after the country’s economical interests.
He said that at least 21,4% of iron-ore output from Kumba Iron Ore’s (Kumba) Sishen mine should be made available at cost plus 3% to support a cost effective steel manufacturing industry in the country.
The Minister added that excessive steel pricing in South Africa in the past had disadvantaged the downstream manufacturing industries. This comes at a time when government has made its mandate of job creation and increasing local production capacity clear.
South Africa’s largest steelmaker, ArcelorMittal South Africa (Mittal), had been receiving the benefit of discounted iron-ore prices for years, but had not been passing on this advantage to downstream consumers.
This bruised the relationship between the Department of Trade and Industry (DTI) and the steel company as the group's access to South African-mined iron-ore on favourable terms had been effectively secured for it by government in 2001, on the provison that the company extended a so-called "developmental" price to South African consumers.
The iron-ore arrangement and the pricing promise had been central to the unbundling deal that led to the creation of separate steel and mining companies from what had previously been the Iscor group.
But the steel group clung to its policy of pricing steel on an import parity basis, later converting to a benchmarked pricing model, which led to a breakdown of trust between the DTI and Mittal.
Last year, Mittal lost its 21,4% Sishen mining right after failing to convert its stake into a new-order mining right as required by South African law.
Kumba’s Sishen Iron Ore Company applied for the mining right, but instead, a prospecting right was granted to Imperial Crown Trading (ICT). However, Kumba has now taken the matter to court as it believed that the granting of ICT’s prospecting licence was unlawful.
Nevertheless, Davies said that whoever took hold of South African resources in the future, had to take on the responsibility of looking after the country’s economical interests.
Edited by: Mariaan Webb Tags :Sishen's mining rights, South African law,
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