Johannesburg - ArcelorMittal South Africa said it will import iron ore should it fail to renegotiate a price deal with Anglo American’s Kumba Iron Ore unit, which sees the steelmaker paying 60 percent more than current market rates.
The companies agreed in November 2013 that Kumba will sell as many as 6.25 million metric tons of iron ore annually to the local unit of the world’s largest steelmaker, known as AMSA, at the cost of production plus a 20 percent margin.
Prices have since declined 61 percent amid a glut in supply as the largest producers including Vale SA and Rio Tinto increased output.
AMSA paid R1.04 billion ($82 million) more for ore in the nine months through June than it would have done should it have bought outside its arrangement with Kumba under spot prices, CEO Paul O’Flaherty said at a presentation in Johannesburg Friday.
“If you were in our shoes, would you continue to buy from Kumba?,” O’Flaherty said. “We will, either way, pursue lower iron-ore prices, with or without Kumba.”
Kumba will issue a response later Friday, Yvonne Mfolo, a spokeswoman for the Pretoria-based company, said in a text message.
AMSA will in August receive a test shipment of ore for its plant at Saldanha Bay in the Western Cape province, Willem Nel, the company’s general manager for procurement, told reporters.
Should talks with Kumba fail, it will supply the facility’s total quarterly requirement of 360 000 tons from October, Nel said.
AMSA is in talks with the government for tariffs on subsidised steel imports from China as the company warns that its Vereeniging plant, South Africa’s oldest steelworks, may face closure, risking 1 200 jobs.
The company has reported losses for four years amid weakening demand and rising operating costs.
“Rome is burning,” O’Flaherty said Friday. “We need action and we need it fast.”
AMSA will commit to supply cheaper steel to South African customers should the government adhere to its tariffs request, O’Flaherty said.
BLOOMBERG