South African government in bid to avert steel industry crisis

13:40, July 20, 2010      

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The South African government sought on Monday to avert a potential crisis in the country's multibillion dollar steel industry.

South Africa's trade and industry minister Rob Davies hosted a meeting between two big companies, South Africa's Kumba Iron Ore and ArcelorMittal, part of the Indian-based Mittal group.

The industry department intervened after Kumba, South Africa's biggest iron-ore producer, decided to cease sales from its iron mine at Sishen in South Africa's Northern Cape to ArcelorMittal, unless ArcelorMittal paid in advance and agreed to unprecedented prices.

ArcelorMittal said in response it would stop exports, close its Saldanha steel mill in South Africa's Western Cape province that focuses on exports, lay off thousands of workers and reduce steel output for the South African domestic market.

Sidwell Medupe, spokesman for Rob Davies said in a statement to the South African Press Association (SAPA) that Monday's meeting resulted in a "constructive engagement" toward seeking a solution to the dispute.

All parties committed themselves to reaching an agreement which would put South Africa first, Medupe said.

"The parties agreed to reconvene on Thursday to take forward the mediation process."

On Friday, the industry department warned the five-month-old dispute "should not escalate to the point that it risks imposing negative consequences on the economy".

The South African government said on Friday that the current impasse should not lead to a situation where iron ore, which had previously been processed in South Africa, was exported without first being processed.

The department also said the dispute should also not be allowed to disrupt South African domestic steel production or price domestic steel even further above the internationally uncompetitive levels which prevailed prior to the dispute.

According to SAPA, on Friday Sishen Iron Ore Company, a subsidiary of Kumba Iron Ore, said it had failed to reach an agreement on interim iron ore prices with ArcelorMittal.

In a statement, Kumba said this was in spite of "extensive negotiations" between the parties in recent months.

SAPA reported that the dispute arose when ArcelorMittal failed to apply to convert its 21.4 percent right in the Sishen mine to a new-order mining right by April 30, which led Kumba to cancel a cheap iron ore supply agreement with the steelmaker.

The matter is currently under arbitration.



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