http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.93Change: 0.00
R/$ = 12.67Change: -0.01
Au 1095.49 $/ozChange: 0.31
Pt 984.00 $/ozChange: 2.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
May 04, 2010

Kumba considers terminating supply to ArcelorMittal SA, as iron-ore dispute heats up

Back
Engineering News Editor Terence Creamer speaks on 702's The Midday Report, anchored by Chris Gibbons
 
 
 
Engineering|Africa|Export|Petroleum|Resources|Transnet|Africa|Steel|Iron Ore|Iron-ore|Power
Engineering|Africa|Export|Petroleum|Resources|Transnet|Africa|Steel|Iron Ore|Iron-ore|Power
engineering|africa-company|export|petroleum|resources|transnet|africa|steel|iron-ore|iron-ore-person|power
© Reuse this



South African iron-ore miner Kumba Iron Ore (KIO) on Tuesday effectively moved its ongoing dispute with ArcelorMittal South Africa (AMSA) from the realm of a pure dispute over pricing, into one that could now also affect supply, indicating to Engineering News Online that it could as "a last resort" terminate supply to Africa's largest steel producer.

In a note to shareholders, the JSE-listed miner said that, unless there was urgent resolution on an interim pricing and payment mechanism, the basis upon which it would continue to supply iron-ore to the steel producer could be affected.

KIO did not immediately indicate a timeframe for reaching such an agreement, but a spokesperson told Engineering News Online that the time period should not exceed eight weeks.

The miner also did not immediately elaborate on what options it was considering for the 6,25-million tons that its supplies yearly to AMSA from its 74%-held Sishen Iron Ore Company (SIOC). However, KIO stressed that it did indeed have "other options to sell the ore".

"We have an agreement with Transnet to deliver an extra four-million tons a year in 2010 and 2011 charging a 'super tariff'. We cannot discount the possibility that, if we cannot reach agreement, a last resort would be to terminate supply," the spokesperson told Engineering News Online.

However, she also stressed that KIO did not believe it was in anyone's interests to stop supply "and we are attempting to do all in our power to avoid such an outcome".

"We have made extensive efforts to come to an agreement with AMSA and have been unable to do so," the spokesperson said.

In its statement to the stock exchange, KIO strongly denied that it had told AMSA that it would continue to invoice on the basis of cost-plus 3% until the dispute had been resolved, as had been stated by the steel producer in its own April 29, 2010, notice to that market.

AMSA also indicated in the same statement that it had raised a contingent liability reflecting the "price derived from an export-parity principle and the contractual cost-plus 3% price, in the event SIOC prevails in the arbitration".

"That statement is incorrect," KIO said.

Instead, the miner argued that its announcement of April 19, 2010, reflected the "true position": "Namely that SIOC required AMSA to accept its interim proposal that AMSA pay the contractual price (cost-plus 3%) to SIOC and the difference between that price and the interim price proposed by SIOC into escrow, or provide a suitable guarantee for its payment in the event of SIOC being successful in the arbitration".

KIO told Engineering News Online that the "contingent liability" would not suffice as a guarantee.

However, AMSA spokesperson Julian Gwillim said that the JSE-listed steel producer stood by its statement of April 29, 2010, and would not enter into negotiations with KIO on the merits of the dispute through the media.

The two companies have been in dispute over the future pricing of iron-ore flowing from the Sishen mine since February 5, when SIOC notified AMSA that it was cancelling a favourable supply deal, struck in 2001, on the basis that AMSA had failed to convert its 21,4% undivided share of the Northern Cape mine in line with the demands of the Mineral and Petroleum Resources Development Act.

SIOC began invoicing AMSA on commercial terms as from March, and AMSA CFO Kobus Verster revealed last week that the difference between the the old agreement and the new invoice was $100/t, with 350 000 t having been supplied during the month.

AMSA has also started charging South African steel consumers a controversial R600/t-plus surcharge as from May 1, 2010, in a bid to partially offset the impact of the rise in iron-ore costs. The proceeds would be recorded as a liability in the group's financial accounts and would be returned to consumers should AMSA prevail in its arbitration dispute with KIO.

The Department of Trade and Industry has lodged a complaint of abuse of dominance over the surcharge with the Competition Commission, while consumers are up in arms over what appears to be an attempt by AMSA to recoup costs associated with its own corporate misjudgement.

AMSA has also confirmed with Engineering News Online that it will increase steel prices by between 2% and 17% as from June 1, 2010 - news that was greeted with anger by steel consumers.

 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Carbon Steel News
Embattled South African steel producer ArcelorMittal South Africa (AMSA) has offered insight into the “fair pricing model” it has tabled before government in return for tariff protection and a government stipulation that locally manufactured steel be designated for...
Newcastle Works
Africa's largest steelmaker ArcelorMittal South Africa said on Friday its half-year losses widened amid lower international demand and a weak economy in its home market. Its headline loss per share rose to nearly 25 cents per share for the six months ended 30 June...
Article contains comments
Article contains comments
More
 
 
Latest News
Embattled South African steel producer ArcelorMittal South Africa (AMSA) has offered insight into the “fair pricing model” it has tabled before government in return for tariff protection and a government stipulation that locally manufactured steel be designated for...
Telecommunications group Telkom on Friday said it had posted a 1.7% uptick in net revenue for the three months to June 30, on the back of a strong performance by mobile on data revenue and higher fixed-line subscription revenue. Mobile net revenue for the first three...
Dangote Cement revised its 2015 spending plans to $1-billion from the $700-million estimated nine months ago after it commissioned two new African plants this June, Nigeria's biggest listed company said on Friday. The company, majority owned by billionaire Aliko...
More
 
 
Recent Research Reports
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Construction 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Electricity 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
Real Economy Insight: Road and Rail 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
 
 
 
 
 
This Week's Magazine
Daimler truck test engineer Dirk Stranz pushes one button, and then retracts his hands from the steering wheel of the Mercedes-Benz Future Truck 2025. “And now the truck is driving itself.”
The statutory body responsible for skills development and support in the banking sector, BANKSETA, was investing R68-million in the capacity building project of the University of Venda (UniVen), announced Bankseta company secretary Caroline King at a media event in...
LIONEL MOYAL Cloud services providers must compete against other cloud services providers for business by providing up-to-date systems and services
Legacy information technology (IT) systems are becoming increasingly obsolete because of the maturity, efficiencies and cost effectiveness of cloud-based IT services, says information and communication technology major T-Systems subsidiary Intervate head Lionel...
ARMANDÉ KRUGER Balancing the collection and processing of data must be aligned to strategy
Many complementary services enable companies to derive broad value from data inside and outside them. The complexity of data management means that companies’ strategies determine the various data systems and functions they will use, says PBT Group regional sales...
The South African Civil Aviation Authority (SACAA) has announced that it had awarded the country’s first remotely piloted aircraft systems (RPAS) pilot’s licence. It was issued on Friday, July 10, to SACAA employee and qualified commercial pilot Nicole Swart,...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $96 Close
Subscribe Now for $96