AMSA not contemplating pricing change following Kumba deal
Steel producer ArcelorMittal South Africa (AMSA) is not considering changes to its pricing policy in light of the iron-ore settlement agreement reached with Kumba and the group’s CEO has also questioned whether the cost-plus-20% deal could truly be considered a ‘developmental price’ as being advocated for by government.
However, CEO Nonkululeko Nyembezi-Heita again stressed that the new all-in pricing arrangement for 6.25-million tons of iron-ore a year, which was unveiled earlier in the week, would be beneficial to the group. This was particularly the case when compared with the interim pricing agreement that was struck after Kumba terminated, in 2010, a cost-plus-3% arrangement that had prevailed following the separation of Iscor into separate mining and steel entities in 2001.
Under the interim deal, which was finalised with the assistance of Department of Trade and Industry (DTI), Kumba had been selling a maximum of 4.8-million tons of iron-ore at a weighted average price of $65/t.
Speaking following the release of stronger third-quarter results, which saw earnings recover to R199-million, from a R168-million loss position during the same period in 2012, Nyembezi-Heita stressed that the settlement had been the outcome of bilateral commercial negotiations and had not been directed by government.
The DTI and the Department of Mineral Resources (DMR) had been informed of developments towards the latter stages of the negotiations, but had not endorsed the settlement.
It, therefore, remained uncertain as to whether government would perceive the cost-plus-20% arrangement as meeting its developmental-pricing aspirations, which could be formalised as part of proposed amendments to the Mineral and Petroleum Resources Development Act. Government believes such pricing to be necessary to stimulate higher levels of beneficiation and to ensure that value was added to locally mined resources ahead of export.
“I am not sure that the DMR believes Kumba has ticked the box,” Nyembezi-Heita said. But from a steel perspective, “nothing really changes” as the idea of a developmental pass-through was predicated on a cost-plus-3% price.
“So there is still some engagement to be made,” she added, while indicating that AMSA planned to continue its discussions with the DTI on the matter.
In the meanwhile, the group was responding to government’s appeals for pricing that improved the ability of local steel users to compete for infrastructure projects on a “selective basis”.
“What we have not done and what is not currently in our plans is a wholesale reduction of steel prices. That has not been part of the discussion, at least internally.”
Nevertheless, the benefits of the settlement were reaffirmed, with CFO Matthias Wellhausen indicating that it was supportive of the group’s objective to improve its earnings before interest, tax, depreciation and amortisation (Ebitda) to $100/t by 2015 through cost reductions and business improvements.
The Ebitda cost of iron-ore was $74/t in 2012, whereas the group was now anticipating costs of closer to $64/t in 2014 as a result of the settlement.
Comments
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation