11 February 2005
Ispat Iscor to play ball over new price model
Carli Lourens
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Trade and Industry Editor
STALLED negotiations about a new pricing model for South African steel buyers look set to resume after Ispat Iscor indicated yesterday it was ready to hand outstanding information to government.
Relations between government and SA’s largest steel maker appeared to sour after government accused the company of delaying the pricing process by not providing all the information required to formulate a new model.
Adding to the ill-feeling, government earlier this week announced that it had revoked antidumping duties that protected Ispat Iscor against cheap steel imports from Russia and Ukraine.
Government, which was looking to unlock the downstream industry’s growth potential, acknowledged that the move could lead to the dumping of steel in SA. But it said local steel producers were unlikely to suffer injury as a result.
Ispat Iscor, which reported a three-fold increase in pretax profit to R7,3bn mainly on the back of record global steel prices last year, saw the move as a threat.
“Obviously it is a concern for us,” Ispat Iscor CEO Davinder Chugh said. Chugh indicated there was consistent transgression of dumping laws by Russia and Ukraine, which are among the world’s lowest-cost producers.
He said Ispat Iscor would keep a close eye on the market, but that the group was not overly perturbed.
Chugh said Ispat Iscor was now ready to hand over the cost-benchmarking data analysis government required. He said the two parties were now looking to set up the next meeting.
He said, however, that Ispat Iscor had lent the downstream industry significant support. A price rebate structure saw Ispat Iscor returning R450m a year to the industry, he said. The company also contributed R45m to the South African Iron and Steel Institute, which was ploughed back into the downstream industry.
Chugh said that in doing so, Ispat Iscor was taking on what was normally the responsibility of government.
Chugh was not concerned about government’s investigation into the elimination or reduction of the 5% duty applicable to all steel imported into SA.
Chugh said the duty was little more than a psychological barrier and was among the lowest import duties in the world. He said duties typically ranged from 10%-30%.
The downstream steel industry lamented Ispat Iscor’s perceived high prices even before international steel prices rocketed last year, driven by Chinese demand.
Ispat Iscor said yesterday that the price of hot-rolled coil, a type of steel, increased by 50% in the year to December.
Harmony Gold Mining said earlier this week that these prices had increased by about 40% in rand terms from January last year to last month and by more than 60% in dollar terms.
University of the Witwatersrand economist Simon Roberts said price differences between SA and other low-cost manufacturing countries remained. Ispat Iscor prices were about 40% higher than those paid by buyers in China and South Korea, 35% higher than in Taiwan, and 7% higher than in Canada.
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