State fury over MittalÆs latest price increase
Siseko Njobeni
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Trade and Industry Correspondent
THE trade and industry department yesterday accused steel giant Mittal Steel SA of abusing its market dominance after the company increased steel prices this week for the third time in three months. As a result, the department said it would now actively seek to lure other international steel investors to compete with Mittal.
Deputy director-general Lionel October said yesterday the department was ôvery disappointedö with MittalÆs decision to hike prices on certain products with effect from next month.
October said the increases were against ôthe spiritö of an agreement between the two parties two years ago. In May 2004, government and Lakshmi MittalÆs LNM Group entered into a memorandum of understanding in which the two parties committed to conclude an agreement on a ôsustainable, competitive pricing modelö.
At the time of the proposed merger of LNM and the then Iscor, former trade and industry minister Alec Erwin said government would support the move if LNM would commit to a ôsuitable developmental pricing modelö.
October said: ôThey (Mittal) are taking advantage of the increase in demand and see that as an opportunity to extract more profits from the situation. The international pricing trends are driven by supply and demand. In SA we have a monopoly.
ôIn view of the situation, we will have to embark on an aggressive recruitment strategy to get steel investors to SA. We will target four or five companies and lobby them to come and invest in SA,ö he said.
The department would target steel producers in Asian countries such as India, a country which he said had a number of medium-sized low-cost steel producers.
ôWe will also consider fast-tracking changes to the Competition Act.
ôOne of the changes will be a definition of excessive pricing.
ôWe also want the (Competition) act to allow the Competition Commission and Tribunal to be able to proactively lodge an investigation without waiting for a complaint. We must also strengthen regulations around pricing disclosure,ö October said.
The Competition Tribunal hearings on MittalÆs alleged anticompetitive behaviour resume next month. The hearings follow a complaint by gold miners Harmony Gold and DRDGOLD, which alleged that the steel maker charged local steel users excessive prices.
October said MittalÆs price increases had prompted the department ôto explore other optionsö, despite the continuing negotiations on an appropriate pricing model.
Company spokesman Tami Didiza declined to comment.
The departmentÆs criticism of MittalÆs decision comes amid continuing negotiations with the company in order to develop a pricing mechanism.
October said the last meeting between the parties was about three months ago when former Mittal CEO Davinder Chugh was still at the helm of the steel maker. ChughÆs successor, Rick Reato, said last month that finalising the negotiations with government was high among his priorities.
On Monday, Mittal announced price increases ranging from 5% to 7,5% on certain products.
It said prices of flat steel products, such as plate, hot-rolled coil and cold-rolled coil, would increase 5% and certain wire-rod products would increase 7,5%.
It said there would be no increases on other long steel products such as billets, rebar, rails and normal wire rod.
Reato said Mittal had attempted to keep the lid on the increases, ôbut international price trends (have) required us to increase the price on selected productsö.
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