File picture: Stephane Mahe, Reuters

Johannesburg -

The Sishen Iron Ore Company (SIOC) and ArcelorMittal South Africa (AMSA) have reached agreement for ArcelorMittal's continued supply of iron ore next year, the trade and industry department said on Thursday.

The existing commercial agreement between the two companies expires at the end of December.

“It is government's understanding that the new interim pricing agreement is for one year, and will govern the terms and conditions on which SIOC will sell iron ore to AMSA from the Sishen Mine, with effect from 1 January 2013,” the department said.

Trade and Industry Minister Rob Davies appointed a mediator at the companies' request to facilitate a new agreement.

Mediator Zavareh Rustomjee had been appointed on condition that the agreement would not prejudice government's policy objectives.

Left unresolved, the dispute could have affected steel production and security of supply. Under the agreement, Sishen would supply a maximum of 4.8 million tons of iron ore a year to ArcelorMittal. It would receive a weighted average price of US65

per ton.

Iron ore specifications, and other terms and conditions, would be the same as those contained in the current interim pricing agreement.

The new agreement secured short-term security of supply and production.

But the companies had failed to agree on developmental processes which government had been seeking.

“The agreement does not ensure that a discounted iron ore price will be passed on as a developmental steel price to the manufacturing sector,” said Davies.

This underlined the need for a set of policy interventions for the domestic manufacturing sector.

The mineral resources department was amending the Mineral Resources and Petroleum Development Act, in order to secure a competitive advantage for manufacturing.

The economic development department was attempting to safeguard the supply of affordable scrap metal to domestic mills and curtail scrap metal export abuse.

The same department was also amending the Competition Act to ensure iron ore price concessions were passed on to downstream users.

The Industrial Development Corporation was fast-tracking new steel investments to strengthen competition in the sector.

Sishen and ArcelorMittal have been involved in a dispute for some time over contested iron ore supplies. - Sapa