Engineering News reported that an arbitration panel has ruled in favor of Kumba Iron Ore in a long running dispute over ArcelorMittal South Africa's right to participate in KIO's South African growth projects.
ArcelorMittal currently accesses 6.5 million tonne early on a cost plus basis from KIO and sources its remaining requirement at market prices.
But Africa's largest steelmaker was of the view that it was permitted, in terms of a 2001 agreement that led to the unbundling of the then Iscor into separate iron ore and steel entities that it could extend the arrangement to new projects, if it could prove that the material would be beneficiated in South Africa.
Mr Alec Erwin trade and industry minister of South Africa said that it is vital for the standalone steel entity to remain reverse integrated into iron ore, notwithstanding the unbundling. He asserted, too, that access to additional raw material at competitive rates would be key to sustaining the group's low cost position. ArcelorMittal South Africa took this principle to suggest that it could participate in new projects and access additional material on a cost plus basis.
However, KIO, which subsequently became a subsidiary of Anglo American, had a different interpretation, which led to the dispute. Corporate negotiations, which were pursued for some time, failed to secure a remedy which ultimately led to the arbitration process. The arbitration panel eventually assembled in mid 2009.
Recently, the panel issued an award in favor of the Sishen Iron Ore Company determining that ArcelorMittal South Africa was not entitled to participate in the ZAR 8.5 billion Sishen South project, currently under development in the Northern Cape. The ruling, which is said to contain 19 points, could be appealed but ArcelorMittal South Africa gave no immediate indication as to whether such a course of action would be pursued.
The steel company said would examine its options. The decision could have an impact on future investment decisions by ArcelorMittal South Africa inside the borders of South Africa. Ahead of the global economic crisis, the group was considering a new ZAR 3 billion long steel investment in Newcastle, KwaZulu Natal. The project was put on ice as recessionary conditions took hold and would now have to be remotivated to the board.
Source: Steel Guru
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