14 December 2012

South Africa: DTI Helps Broker Interim Agreement Between Sishen, Arcelormittal

Pretoria — Following a mediation process, Sishen Iron Ore Company (SIOC) and ArcelorMittal (AMSA) have reached an agreement on conditions that iron ore will be sold to the steel producer, says the Department of Trade and Industry.

The agreement was reached just as the existing commercial agreement between SIOC to continue to supply iron ore to AMSA was set to expire.

This comes following a mediation process undertaken by a mediator appointed by Minister Rob Davies following a request to the minister by the parties to the dispute for mediation.

The interim pricing agreement is for one year and comes into effect from 1 January next year.

"The agreement ensures that SIOC will supply a maximum annual volume of 4.8 million tonnes of iron ore to AMSA at a weighted average of US$65 per tonne and that the lump: fine ratio which has been agreed to is 60:40.

"The iron ore specifications as well as other terms and conditions on which iron ore is sold will be on the same material terms as those contained in the current interim pricing agreement which expires on 31 December 2012," said the dti of the agreement.

The minister agreed to appoint Dr Zavareh Rustomjee as a mediator, provided that any commercial agreement reached would of necessity be, without prejudice to governments longer term policy objectives, set out in the recent Cabinet decisions on this and related matters.

Government was conscious of a potential threat to steel production and security of supply arising from the dispute. It was also mindful of the parallel and interlocking disputes on matters relevant to this issue, currently before the courts.

The minister said: "Whilst the commercial agreement that has been reached secures short term security of supply and production it is noted with considerable concern that the parties have failed to agree on the developmental intent and outcomes that government has been seeking in the iron ore and steel value chain.

"The agreement does not ensure that a discounted iron ore price will be passed on as a developmental steel price to the manufacturing sector."

This, he said, underlined Cabinet conviction on the need for a set of policy interventions to secure a competitive advantage for the domestic manufacturing sector and its decision to accelerate the deployment of those policy instruments proposed by the Inter-Departmental Task Team on Iron Ore and Steel.

The interventions include a fast-track legislative process led by the Department of Mineral Resources to amend the Mineral Resources and Petroleum Development Act to secure a competitive advantage for the manufacturing sector which arises from South Africa's enormous resource endowment.

It also in includes a process led by the Economic Development Department (EDD) to utilise the International Trade Administration Act to safeguard the supply of affordable scrap metal to domestic mills and curtail the abuse of export of scrap metal, including with respect to associated cable and metal theft.

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