Thursday, 12 May 2011
South Africa's trade minister Mr Rob Davies said that he expects ArcelorMittal South Africa Limited and Kumba Iron Ore Limited to ensure iron ore supplies continue after an interim pricing agreement expires in July 2011.
Mr Davies said in an interview in Cape Town that "I am led to believe we are not likely to have the same disruption that we had last year. We want to ensure we get a competitive price for downstream users of steel."
Mr Davies said that "ArcelorMittal is the largest shareholder in the South African company, while Kumba is a unit of Anglo American Plc. South Africa's government also wants to ensure a plan by Wal Mart Stores Inc to buy a 51% stake in Johannesburg based Massmart Holdings Limited doesn't have negative consequences for jobs in South Africa."
The minister reiterated concerns about the strength of the rand, which has surged 40% against the dollar since the start of 2009. He said that "We have an overvalued currency driven by flows of capital. The over valued currency is having a detrimental impact on a number of industrial activities."
In March 2010, Pretoria based Kumba canceled a nine year deal that compelled it to supply ore from its Sishen mine to ArcelorMittal at 3% more than the cost of production after the steelmaker missed a deadline to renew mineral rights. The steelmaker said the decision could force it to close its Saldanha mill, cut all exports and fire as many as 4,000 workers.
The companies reached agreement on an interim supply accord on July 22 under which ArcelorMittal will pay USD 50 a tonne for ore supplied to its Saldanha mill on South Africa's west coast and USD 70 a tonne for deliveries to its two inland mills. The companies are currently in arbitration over the ore supply contract. (sourced bloomberg)
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