On July 16, South Africa's Department of Trade and Industry (DTI) released a statement, following Johannesburg Stock Exchange-listed Kumba Iron Ore's prepayment demand for its iron ore supplies to ArcelorMittal South Africa (ArcelorMittal SA), beginning from August 1, saying that it views the dispute between ArcelorMittal SA and Kumba Iron Ore "with grave concern".
The DTI underlined that a dispute between two companies should not escalate to the point that it risks imposing negative consequences on the South African economy. In particular, said DTI, the current impasse should not lead to a situation in which iron ore (which has previously been processed in the country) is exported in unbeneficiated form, domestic steel production is disrupted, and domestic steel is priced even further above the internationally uncompetitive levels which have prevailed prior to the dispute.
Kumba Iron Ore, through its subsidiary Sishen Iron Ore Company, had earlier requested ArcelorMittal SA to pay the difference between the disputed "three percent above cost" portion of the price and the market price, into an escrow account, but ArcelorMittal SA did not take up the offer.
As SteelOrbis, previously reported, ArcelorMittal SA imposed a surcharge from May 1 on customers to partly offset higher iron ore prices from the Sishen mine, which is operated by Kumba Iron Ore.
Kumba Iron Ore made a second discounted-price offer to ArcelorMittal SA with a deadline on July 15, which the steelmaker again did not take up.
With its latest announcement Kumba Iron Ore said that its Sishen Iron Ore Company would only supply iron ore to ArcelorMittal SA on condition that payment, based on its second discounted price proposal, is made in advance, beginning from August 1.
The dispute between the two companies began in late February this year, when Kumba Iron Ore announced that it canceled the supply agreement entered into between the two companies in 2001 under which Kumba Iron Ore supplied iron ore to ArcelorMittal SA on a cost plus three percent basis.