[miningmx.com] — THE government said on Thursday it would do everything in its power to ensure domestic steel and iron manufacturers were able to source iron ore from Sishen mine at a discount, subject to a steel pricing agreement.
Speaking at a briefing of cabinet’s economic sector and employment cluster, Trade and Industry Minister Rob Davis said the 21.4% right in Sishen awarded to ArcelorMittal following the unbundling of Iscor was always intended to achieve lower steel prices for the benefit of the local industry.
“That was a social and public development obligation to the South African economy,’ Davis said. “Excessive steel price are very detrimental to downstream industrial processes.’
Using the example of government’s new growth path target of creating 20,000 jobs in the automotive component sector, Davis said this would only be attainable if the motor manufacturing industry could increase its competitiveness on the back of lower steel prices.
“This is where the real jobs are,’ he said.
Davis’ comments followed a cabinet announcement in November, which said the state would seek a deal that would allow ArcelorMittal and other steel producers to source 21.4% of Sishen’s ore output at cost plus 3%, through an inter-departmental task team on iron ore and steel.
This was subject to a steel pricing model which should result in domestic steel prices being no higher than the lowest quartile of global prices.
“Whoever benefits from such a deal would have an obligation,’ Davis said, adding that the task team on Wednesday finalised a process of engagement with industry players.
“It won’t be an easy engagement with the companies involved, but we are determined to make this work.’
ArcelorMittal, which has often been criticised for not passing on the benefit of sourcing ore at cost plus 3%, lost its 21.4% mining right in Sishen after it failed to apply for a new order right before a deadline of April 30 2009.
The right was subsequently awarded to Imperial Crown Trading 289, a decision which has become the subject of a high court case between Kumba Iron Ore – the operator and majority rights holder of Sishen – as well as the department of mineral resources and ICT.
Kumba and ArcelorMittal have also embarked on an arbitration process to determine the price at which Kumba should supply iron ore to the steel maker.
A Kumba spokesperson said the company has already met some members of the inter-departmental task team.
“We are very happy to engage (government) on this issue, but we won’t be able to put anything on the table before the arbitration and high court proceedings have been concluded,’ the spokesperson said.
Kumba CEO Chris Griffith said at the release of the group’s annual results earlier in February that the company had performed an economic analysis of the entire iron ore and steel value chain.
The findings of this analysis would be made public soon, the spokesperson said.
Thursday’s briefing also followed an announcement on Wednesday by Afripalm Resources chairperson Lazarus Zim that the group had signed a memorandum of understanding with the Steel Authority of India to build a R21bn steel mill in South Africa.
