http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.90Change: -0.17
R/$ = 13.19Change: -0.05
Au 1128.48 $/ozChange: 4.41
Pt 1000.00 $/ozChange: -9.00
 
 
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 Metals News
Updated 18 minutes ago South Africa will introduce a new 10% customs duty on certain steel products, Trade and Industry Minister Dr Rob Davies said on Friday, aimed at protecting the local manufacturing industry from cheaper Chinese steel imports. Following complaints from ArcelorMittal...
MEGAVAC CYCLONE LOADER The unit will be used in South 32’s smelter for the recovery of 90 t/d of bath material
Local furnace and industrial services company Dickinson Group last month delivered its new MegaVac Cyclone Loader to resources company South 32, where the machine will be used for a large basement cleaning project for the company’s Mozal aluminium smelter, in...
Embattled steel producer Evraz Highveld Steel and Vanadium has granted potential bidders a week’s extension for the submission of binding offers. An initial deadline of August 21 had been set, which has now been extended to August 28 at the request of the bidders....
Article contains comments
Article contains comments
More
 
 
Latest News
Updated 5 minutes ago South Africa's coal-fired Medupi power station is expected to be fully operational in the first half of 2019, the Cabinet said on Friday. "Once completed, it will be the fourth largest coal-fired plant and the largest dry-cooled power station in the world," Cabinet...
Updated 17 minutes ago South Africa will introduce a new 10% customs duty on certain steel products, Trade and Industry Minister Dr Rob Davies said on Friday, aimed at protecting the local manufacturing industry from cheaper Chinese steel imports. Following complaints from ArcelorMittal...
Updated 42 minutes ago JSE-listed Nampak on Friday announced the appointment of Glenn Fullerton as CFO, effective September 1. The former MB Technologies CEO and CFO succeeded Gareth Griffiths, who retired in June.
More
 
 
Recent Research Reports
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
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.
 
 
 
 
 
This Week's Magazine
Updated 2 hours 44 minutes ago Training company The Intelligence Transfer Centre will host the fourth yearly Environmental Crimes Conference at the Indaba Hotel, in Fourways, Johannesburg between September 9 and 10. Confirmed key regulatory bodies that will attend the event include the Department...
The government of Egypt has said it is ready to provide technical assistance to Malawi in the development of the Shire–Zambezi waterway, which is designed to link landlocked Malawi to the Indian Ocean by opening the two rivers for navigation. Egyptian ambassador to...
Kenya is finally set to start building a new multipurpose petroleum pipeline, after securing a $350-loan from a consortium of banks, including South Africa's Rand Merchant Bank. The other banks in the consortium are the Cooperative Bank of Kenya, Citibank's Kenya...
MARAIS VAN HEERDEN The owner/operator should be able to view the overall project design and progress made at any time
Three-dimensional (3D) engineering design models can now be viewed on tablets, which enable stakeholders to view the design without having to buy the design software used to create it, says engineering design firm 3DDraughting executive Marais van Heerden. The...
Ford’s newest offering in a long list of newcomers to the local market in the last two years is the B-Max multi-activity vehicle (MAV). The B-Max will play in the so called B-MAV segment, or the small MAV segment, currently dominated by Toyota’s Avanza, which sells...
 
 
 
 
 
 
 
 
 
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