Amsa warns of beneficiation review

Jan de Lange | Mon, 19 Jul 2010 08:53

[miningmx.com] -- GOVERNMENT'S mineral enrichment plans will need a total review if Saldanha Steel can no longer get iron ore at cost-plus-3%, says ArcelorMittal (Amsa) South Africa CEO, Nonkululeko Nyembezi-Heita.

The dispute between Amsa and Kumba – probably the worst corporate squabble in years – could come to a head on Monday when trade & industry minister, Rob Davies, deliberates with Nyembezi-Heita and Kumba CEO, Chris Griffith to prevent harm to the economy.

The possibility of steel production being disrupted, because Kumba refuses to deliver iron ore at cost-plus-3% to Amsa any longer, caused Davies to step in to convene a meeting with the two steel bosses.

On Sunday, it also became apparent that during recent negotiations Amsa had offered to pay $50/tonne for iron ore from Sishen instead of the R150/tonne that had applied so far.

But the Anglo-controlled Kumba had insisted on $80/tonne, though it agreed that Saldanha Steel, as the most vulnerable of Amsa’s plants, could pay $50/tonne.

Amsa usually holds two months’ worth of iron ore on hand, but the Transnet strike at the end of May reduced its stockpile to less than half of that.

Amsa will therefore be able to produce steel to the end of August, at most, if Kumba carries out its threat to stop delivering iron ore from Sishen until the steelmaker pays market-related prices for the ore in advance.

In May, Davies took Amsa seriously to task because the steel giant imposed a R500/tonne steel levy on all its clients.

Amsa wanted to use this to provide for its losses in the event of losing the arbitration process with Kumba, in which a decision is needed as to whether Kumba is still obliged to deliver iron ore to Amsa at cost-plus-3%.

As an interim measure Kumba proposed that Amsa pay $50/tonne for ore delivered to Saldanha Steel, its vulnerable unit, and $80/tonne to the inland plants at Vanderbijlpark, Newcastle and Vereeniging.

Since Friday various sources have pointed out that maintenance at Saldanha Steel has been neglected in recent years and that production costs have escalated.

On Sunday, Nyembezi-Heita told Sake24 that maintenance at all of Amsa’s plants had been scaled down since the 2008 economic crisis.

This was the case at most steel plants in the world.

Saldanha was built to process iron ore before it is exported, she said. For that reason Saldanha needed to get ore at cost price. If it were not for that, Saldanha would never have been built.

- Sake24.com