A report detailing possible policy actions that could be taken to ensure both a viable steel manufacturing industry in South Africa, as well as competitive domestic steel pricing is nearing completion and will be submitted to Cabinet soon, Trade and Industry Minister Dr Rob Davies has confirmed.
The report, which was precipitated by the high-profile corporate battle between Kumba Iron Ore (Kumba) and ArcelorMittal South Africa (Mittal) over iron-ore pricing, was close to being finalised by an interdepartmental task team, comprising officials from the departments of Trade and Industry, Economic Development and Mineral Resources.
Speaking on the sidelines of a function to launch a new R20-billion tax incentive for manufacturing investors, Davies said that government remained "determined" to ensure that the local steel industry continued to receive "concessional" iron-ore prices, but that those prices be "passed on" in the form of a competitive domestic steel price.
He said that government would not be diverted from pursuing those two principles, no matter what "internal arrangements and agreements" existed between participants in the iron-ore mining and steelmaking sectors.
"Of course, we want to work with the players in those particular sectors to ensure maximum cooperation. But we are not going to let this matter go, because the steel price is very important."
Referring to an independent survey of downstream steel consumers, Davies noted that 20% of the downstream users canvassed indicated that they would increase employment by 10%, or more, should there be a 10% reduction in the steel price.
Should there be a 20% reduction, "something like 40% of downstream steel users would increase employment by 10%, or more".
"So this is a significant issue . . . for the manufacturing sector, which we want to move forward on."
Kumba cancelled the cost-plus 3% pricing agreement with Mittal as from March 1, 2010, owing to the steel group's failure to convert its Sishen mineral rights. These rights are now the subject of legal action taken by Kumba against the Department of Mineral Resources and Imperial Crown Trading - Kumba alleges that the exploration rights were obtained irregularly and fraudulently.
Subsequently, the two companies, which are pursuing arbitration over the matter, agreed upon an interim arrangement, whereby iron-ore is being supplied to the Saldanha works at a fixed price of $50/t free-on-rail and a fixed price of $70/t, for both lump and fine material, supplied to Mittal's inland facilities.
The interim arrangement is set to endure until July 31, 2011.