ArcelorMittal S. Africa introduces surcharge on steel

ArcelorMittal S. Africa introduces surcharge on steel. ArcelorMittal South Africa Ltd., a unit of the world’s largest steelmaker, will introduce a surcharge on steel with immediate effect after failing to resolve a pricing dispute with Kumba Iron Ore Ltd., which supplies two-thirds of its iron ore. The surcharge, based on iron ore spot prices, may add about 600 rand ($81) per metric ton to the price paid by commercial steel users, Chief Executive Officer Nonkululeko Nyembezi-Heita said. “We can expect it will fluctuate,” she said in an interview from Johannesburg today. ArcelorMittal South Africa is trying to prevent Kumba from canceling an agreement to ship iron ore at 3 percent above production costs. The pact boosts the profits of the steelmaker while depressing those of Kumba. Vanderbijlpark-based ArcelorMittal South Africa will in the “next couple of days” sign an interim supply agreement with Kumba, which wants to supply iron ore at commercial rates, Nyembezi-Heita said. “We tried to get Kumba to supply ore at cost-plus 3 percent until the end of June. They refused.” The steelmaker was left with “no alternative” and had to “mitigate the additional iron ore cost” with a surcharge, it said in a stock exchange statement today. The surcharge will be refunded to customers if ArcelorMittal South Africa successfully enforces its agreement, it said. Mining Rights Kumba, 63 percent-owned by Anglo American Plc, said on Feb. 26 it wouldn’t abide by terms of a 2001 pricing accord because the steelmaker hadn’t renewed its mining rights for 21.4 percent of the Sishen mine by a government deadline of May 2009. This allowed it to cancel the nine-year-old supply contract, it said. Kumba’s Sishen Iron Ore Corp. owns the other mining rights in Sishen, in South Africa’s Northern Cape province. “We always understood that Kumba will take the lead,” in renewing mining rights, Nyembezi-Heita said. South African Trade Minister Rob Davies said on March 11 that he was concerned the dispute would affect local steel prices. Iron ore prices are rising as steelmakers restart capacity and rebuild stockpiles after the biggest slump in demand since World War II.