[miningmx.com] — Johannesburg – The government is “unapologetic” about its unhappiness with the steel production industry, Trade and Industry Minister Rob Davies said on Wednesday.
“We have not been happy with the pricing policy that has emerged from local steel producers,” he told media at the launch of the latest industrial policy action plan (IPAP).
“We are unapologetic about that,” he said.
The ministers of trade and industry, economic development and mineral resources have established an inter-departmental task team to investigate the appropriate policies to achieve certain developmental goals related to the South African iron and steel sectors.
The discussions were accelerated after Kumba’s decision to cancel an agreement to supply iron ore at cost plus 3% to ARCELORMITTAL SOUTH AFRICA LIMITED.
This came about after ArcelorMittal SA failed to renew its mineral rights for a 21.4% stake in Sishen.
Anglo-American subsidiary Kumba owns 78.6% of Sishen, which is one of the world’s largest and richest iron ore mines.
“We cannot sit idly by and see 21.4%… in one of the most productive iron ore mines… going to get frittered away in further exports as dirt out of the ground,” Davies said of ArcelorMittal SA.
He said the price of steel was an inhibiting factor in manufacturing.
The 21.4% stake had to be made locally available at cost plus 3% as it was a social and developmental obligation “that we are determined to retake as government”, Davies said.
“Whoever benefits from it has obligations too.”
He said research had found that 21.8% of firms surveyed that used steel products had said that if there were a 10% reduction in the steel price, they could increase jobs by 10%.
“We are not convinced by other studies that have been around in the press,” Davies said.
Last week, Kumba Iron Ore released a study which found there would be no significant effect on manufacturing growth if the price of iron ore was lowered as steel accounted for a small share of costs of most downstream manufacturers.
Davies disagreed. He said in some food products, the price of the can was 50% of the price on the shelf.
Steel is a “huge cost item” and the monopoly over steel production was a problem, he said.
