South Africa’s largest steel producer ArcelorMittal South Africa would raise domestic selling prices for the second month on the trot as from August 1, 2009, despite sustained rand strength.

In May, the JSE-listed group announced that prices would rise by between 4% and 6% on average as from July 1, which was the first increase instituted since August of the previous year.

In fact, between September and May, the group had been forced to cut prices several times on the back of a precipitous fall in steel prices internationally, with domestic prices falling by over 60% on average over that eight-month period.

But, the company sent notices to its customers on Monday, in which it indicated that the base price for flat-steel products would rise by R200/t on average, equating to an average increase of between 3% and 4% across its flat-product range.

The base price for long-steel products would rise on average by R250/t, or 4% across its long-product range.

The company said that the price increases reflected a continuation of the positive price momentum in the basket of overseas prices that it used to set domestic selling prices.

The company had moved away from its previous formula, which was based on import parity pricing, ahead of the South African Competition Tribunal’s first-ever hearing into a complaint of excessive pricing.

The tribunal ruled against the company, but the Competition Appeal Court had since sent the case back for further deliberations and a fresh set of hearings.

The price increase announcement was made against the backdrop of several recent reports suggesting that there was indeed upward momentum. One of these, by independent steel advisory firm MEPS, noted that the upward momentum in prices had been detected in 68% of the emerging markets it monitored.

But, ArcelorMittal South Africa’s price-setting formula was also highly sensitive to the movement of the South Africa rand against the US dollar.

The local unit had been one of the best performing currencies against the greenback during 2009 and was trading at close to its highs of R7,80/US$1 on Monday, having recovered strongly from its low of R10,60/US$1, recorded on March 5, 2009.

Earlier, ArcelorMittal South Africa told Reuters that it expected the stronger rand to weigh significantly on its second-quarter results. CEO Nonkululeko Nyembezi-Heita told Reuters that the strong rise in the rand against the US dollar had not been factored in to its April assessment of a marginally improved second-quarter.

Neither Highveld Steel & Vanadium, South Africa’s second-largest producer, nor Murray & Roberts’ Cisco, of Cape Town, had raised prices in July. But, Engineering News Online could not immediately ascertain whether the two companies intended to institute price increases as from August.

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