Business

Kumba, Mittal talks 'constructive'

21 July 2010

The meeting between Kumba Iron Ore and ArcelorMittal hosted by Trade and Industry Minister Rob Davies on Tuesday saw a "constructive engagement" towards resolving the dispute between the two companies.

The Department of Trade and Industry (DTI) said in a statement that all parties had committed themselves to reaching an agreement that would put the country first.

"The parties agreed to reconvene on Thursday to take forward the mediation process," said Davies' spokesman, Sidwell Medupe.

Intervention needed

The department decided to intervene after Kumba, South Africa's biggest iron-ore producer, decided to cease sales from its Sishen mine to ArcelorMittal unless it paid in advance and agreed to unprecedented prices.

In response, ArcelorMittal said it would stop exports, close its Saldanha steel mill that focuses on exports, lay off thousands of workers, and reduce steel output for the domestic market.

On Friday, the department said the five-month-long dispute "should not escalate to the point that it risks imposing negative consequences on the economy".

Economic threats

In particular, the current impasse should not lead to a situation where iron ore, which had previously been processed in the country, was exported without first being processed, the department said.

The dispute should also not be allowed to disrupt domestic steel production or price domestic steel even further above the internationally uncompetitive levels which prevailed prior to the dispute.

On Friday, Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore, said it had failed to reach an agreement on interim iron ore prices with ArcelorMittal.

Kumba said in a statement that this was in spite of "extensive negotiations" between the parties in recent months.

The dispute arose when ArcelorMittal failed to apply to convert its 21.4 percent right in the Sishen mine to a new-order mining right by April 30, which led Kumba to cancel a cheap iron ore supply agreement with the steelmaker.

The matter was currently under arbitration.

Requests rejected

Kumba was demanding that ArcelorMittal pay for iron ore before it was delivered, because the latter had dismissed options that Kumba put forward to resolve the dispute.

The first option was that ArcelorMittal pay the difference between the old agreement and the market price into an escrow account.

The second option was that ArcelorMittal paid $50 a metric ton for ore supplied to its Saldanha plant on the coast and $80 a ton for ore supplied to its plants inland.

ArcelorMittal rejected both options.

Representatives from the companies were not available for comment ahead of Tuesday's meeting.

Sapa